Should business expenses be stated net or gross?
Like business income, business expenses must also be stated at net value - i.e. excluding VAT. However, the VAT paid is part of the business expenses and must therefore be entered separately under "VAT paid".
Exception: Small businesses that have opted for the small business regulation under section 19 of the VAT Act enter their business expenses with the gross amounts, as they cannot deduct the VAT included as input tax. The same applies to farmers and foresters who apply the flat-rate input tax deduction under section 24 of the VAT Act. Small businesses may then not enter any "VAT paid".
Business expenses are deductible in the year in which you paid them. Regularly recurring business expenses belong to the relevant year even if you pay them within a period of 10 days after or before the tax year, e.g. ongoing insurance premiums, leases, rents, salaries.
The advance VAT payment for December (with extended deadlines: November) or for the fourth quarter, which must be paid by 10 January of the following year, still belongs to the old year and can be deducted as business expenses there. The tax authorities are very strict here: If the advance VAT payment is made after 10 January, it can no longer be recorded as a business expense in the old year for those using the cash method, but must be recorded in the new year. Payment after 10 January is no longer considered a regularly recurring expense. If 10 January is a Saturday or Sunday, the due date for the advance VAT payment is postponed to the next working day, but this extension in the VAT Act has no effect on the 10-day period according to section 11 of the Income Tax Act (BFH ruling of 11.11.2014, VIII R 34/12).
But beware: The regulation is extremely complicated and has numerous special features, for example in the case of direct debit. If necessary, ask your tax office when the advance VAT payment is to be recorded.
Should business expenses be stated net or gross?
Increase in the business expense allowance for childminders
The tax classification of childminders (nanny or childminder) mainly depends on the location of the service.
- If the childminder looks after children in their family home according to parents' instructions, they are usually considered an employee. The parents are the employers, and the childminder earns income from employment.
- If the childminder looks after children from different families independently in their own home or other premises, this is self-employment. They earn income from freelance work.
Self-employed childminders can claim business expenses. From 1 January 2023, the flat rate for business expenses for them will be increased from 300 Euro to 400 Euro per child per month.
Increase in the business expense allowance for childminders
Increase in the business expense allowance for writers and journalists
For certain activities, there is the option to use a business expense allowance to reduce tax.
In the following cases, a flat rate can be claimed instead of proven business expenses:
- For full-time self-employed writing or journalistic activities: 30% of business income, up to a maximum of 3,600 Euro per year.
- For part-time scientific, artistic or writing activities (including lecturing, teaching and examination activities): 25% of business income, up to a maximum of 900 Euro per year. The maximum amount of 900 Euro can only be claimed once for all part-time activities covered by the simplification rule.
These business expense allowances will be increased from 1 January 2023.
Increase in the business expense allowance for writers and journalists
