When are relocation costs recognised despite a small reduction in travel time?

The Cologne Tax Court has issued a remarkable ruling in favour of taxpayers. Although the required travel time saving of at least 1 hour was not achieved, the relocation costs were recognised as business expenses. Relocation costs are tax-deductible if there are professional reasons, such as a change of employer, a transfer, or the occupation or vacating of a company flat.

But did you know that a move can be professionally motivated even if the travel time saving is less than one hour? This is the case if the move leads to a "significant improvement in working conditions".

In the case in question, the workplace was reached on foot in less than 5 minutes after the move. The professional reason was that the accessibility of the workplace without transport led to a significant improvement in working conditions (Cologne Tax Court, 24.2.2016, 3 K 3502/13).

Other factors, such as the elimination of time pressure and stress, played a role. The more convenient handling of transporting heavy luggage was also taken into account. The tax judges emphasised that the private motive of acquiring property is not called into question by the professional reason.

Are you looking for a closer flat to save time and stress on your commute? Even the expenses for the search, if unsuccessful, can sometimes be claimed as (unsuccessful) relocation costs, provided that a daily travel time saving of at least one hour was to be expected (Düsseldorf Tax Court, 24.3.1994, EFG 1994 p. 652).

The Hamburg Tax Court also ruled that relocation costs can be professionally motivated if the move leads to a significant easing of working conditions, without any travel time saving or change of workplace. This can be the case, for example, if a move is made to set up a home office for each spouse (Hamburg Tax Court, judgement of 23.02.2023, 5 K 190/22, appeal VI R 3/23).