Business expenses

Business expenses (Betriebsausgaben) are all expenses caused by the business (§ 4 (4) EStG). They reduce taxable profit and are a basic term in German tax law for companies, the self-employed and freelancers. For employees, the counterpart is called income-related expenses.

Typical business expenses (list)

• Travel expenses: travel costs, accommodation costs, additional meal expenses, incidental travel expenses
• Office supplies, postage, telephone and internet
• Rent for an office or practice
• Software, licences and depreciation on purchases
• Training, specialist literature and membership fees
• Entertainment, insurance and external services such as tax advice

Deducting business expenses: freelancers and the self-employed

Freelancers and the self-employed deduct their business expenses when determining their profit, usually in the cash-basis income statement (EÜR). For some professions, such as writing or journalistic activities, the tax authorities also allow a flat-rate business expense allowance instead of individual proof.

Difference to private costs

Only expenses caused by the business are deductible. Private living costs do not count. For mixed use, for example of a telephone or vehicle, the business share is separated and documented.

Non-deductible or partly deductible business expenses

Some expenses are business-related but limited for tax purposes (§ 4 (5) EStG). Examples: business entertainment expenses are only 70% deductible, gifts to business partners only up to €50 per person and year, meals on trips only in the amount of the allowances.

Proof and documentation

You need a receipt for every business expense. If it is missing, a self-issued receipt can help. In which year an expense counts depends on how profit is determined: in cash-basis accounting, the day of payment counts; with a balance sheet, the economic allocation. The receipt date is an important indication for this, see also deadline for expense reports. Traceable documentation is necessary even for small amounts, especially during a tax audit or for the tax advisor.

Business expenses in Spesenfuchs

Spesenfuchs records travel expenses and other expenses with receipts, and allowances are calculated automatically. Everything is documented so that it can be passed directly to accounting, with details such as receipt date, amount, payee and purpose.

Typical mistakes

• Private expenses are accidentally recorded as business expenses
• Receipts are missing or cannot be clearly assigned
• No split for expenses with mixed use
• Entertainment is deducted in full instead of 70%

Legal basis and sources: § 4 (4) and (5) EStG: business expenses