It is crucial for managers to know exactly what their tax-deductible expenses are in a professional context, as these can help to reduce their tax burden.
These expenses are declared as income-related expenses in the income tax return.
Care must be taken to ensure accurate documentation.
Below you will find a summary of deductible expenses:
1. entertainment expenses for business purposes
Entertainment expenses for business reasons offer an opportunity to reduce the tax burden.
However, there are important criteria that must be met in order to claim the expenses for tax purposes.
Managers must pay particular attention to the professional nature of the entertainment and the selection of participants in order to avoid tax deduction restrictions.
Professional or private reason for the hospitality
- The reason for the hospitality must be clearly professional in order to be able to deduct the costs.
- Typical professional occasions include the signing of contracts, long-service anniversaries or farewell parties for managers.
- Special occasions such as milestone birthdays can also be considered work-related under certain conditions.
Note the group of participants
- The participants of the hospitality are a further criterion: business partners, colleagues or public persons speak for a professional occasion.
- However, if only selected friends or private acquaintances are invited, this may reduce the deductibility.
Organization and invitation
- Who organizes and invites the event also influences the tax assessment: If the event is organized by the employer, the costs are usually deductible.
- Private events in addition to official company events, on the other hand, can be considered privately organized and are then not deductible.
Allocation for mixed events
- If both business and private guests are present at the hospitality event, the costs must be divided accordingly.
- Only the proportionate costs for business-related guests are deductible.
Deduction restrictions for business events
- In the case of business-related hospitality (e.g. with business partners), only 70% of the costs are deductible.
- It is important to accurately document all relevant details such as location, date, participants and occasion in order to secure the deduction.
2. gifts to business partners and customers
Giving gifts to business partners and customers is not only a good way to cultivate relationships, it is also tax-deductible. However, managers must observe the strict guidelines on documentation and value limits in order not to jeopardize tax deductibility.
- Gifts can be deducted as business expenses if they are business-related. The name of the business partner or customer must be documented, as well as the reason for the gift. The invoice must be kept.
- The maximum value of the gift may not exceed EUR 50 (including VAT). Otherwise the expenses are not fully tax-deductible.
- Private gifts are not tax-deductible.
Gifts to employees
- Gifts to employees are deductible for professional reasons and are not subject to the value limit of EUR 50, as is the case for business customers.
- The name and the occasion must also be documented here. The invoice must be kept.
Outplacement counseling (professional reorientation)
Costs for outplacement counseling are tax-deductible if the costs are borne by the employee and not by the employer.
This is because the assumption of costs by the employer is tax-free.
Farewell party
The costs of a work-related farewell party are fully deductible as business expenses.
However, the situation is different if business clients and customers also attend the party.
In this case, only 70% of the costs are deductible.
Advice recommendation
It is crucial for managers to know and document the tax deductibility of their expenses.
It should be noted that each case is a case-by-case decision.
Executives should seek professional advice in order to make the most of tax benefits and avoid mistakes.
We are at your side with our expertise!
The author: Timo Unterberg
Anyone who knows me knows that tax law is my passion! When I am not advising young growth companies and medium-sized corporate clients on restructuring, financing issues or corporate succession, I am on the road as a lecturer in tax consultant training and continuing education. I also regularly write tax-related articles for specialist journals.
