Staff assigned to work in Germany for longer than six months generally become tax-resident (183-day rule). Up to now, their German employer has usually been seen as providing them with a regular German place of work with the consequence that their accommodation costs were regarded as privately incurred. Contribution by an employer to the rent of a flat thus became taxable income as part of the salary package.
Some relief was potentially available under the heading of double household relief, but this was restricted to cases where the employee’s family did not move with him – he regularly going back to visit them – and even then to the cost of the first 60 square metres of local floor space.
The 2008 revision to the official Wages Withholding Tax Guidelines has brought an interesting new development to the fore. The regular workplace has been redefined to include any location which the employee regularly and frequently visits. Broadly, this means once a week.
An employee will therefore now be more likely than before to have more than one regular place of work with consequent restrictions on the amount of travelling costs – especially car mileage allowances – that an employer can reimburse tax-free. However, this broadening of scope has been mitigated by a further condition, that a regular workplace be more than temporary. A fixed period international assignee would appear to qualify as temporary and therefore as being without any regular workplace at all. His living accommodation costs then become deductible as business travel. Reimbursement by the employer is tax-free.
Informally, members of the tax administration have confirmed their agreement with this conclusion. An employer can clear any remaining doubt by asking for a ruling.
author : Sabine Ziesecke (sabine.ziesecke@de.pwc.com)
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