For employees in the service of the Federal Republic of Germany (e.g. ambassadors), field staff, employees on secondment, etc., it is quite common to work for several days, weeks or months at the location of their foreign place of employment. In these cases, the employer usually provides accommodation for its employees. However, it may be the case that employees have to bear part of the accommodation costs themselves or even fully pay for their own accommodation. How the expenses for a second household (doppelte Haushaltsführung) are to be taken into account in the tax return, particularly where the place of employment is abroad, is set out below on the basis of a recent BFH ruling.
Background: Accommodation costs in the case of a second household for work purposes
In principle, all expenses connected with a second accommodation maintained for work-related reasons (i.e. in addition to a private home) are recognised as income-related expenses (Werbungskosten). In addition, the taxpayer must actually bear a financial burden from the accommodation (no full reimbursement or provision by the employer). For accommodation in connection with a second household within Germany, however, only expenses (including ancillary costs) of up to EUR 1,000 per month may be claimed since the 2014 assessment period (§ 9 Abs. 1 S. 3 Nr. 5 S. 4 EStG). Travel costs in the case of a second household may be claimed for one family home journey per week (home – first place of work – home), even if the taxpayer commutes more frequently between home and first place of work (§ 9 Abs. 1 S. 3 Nr. 5 S. 5 EStG). EUR 0.30 may be claimed for each full kilometre of travel distance (outward and return journey) (§ 9 Abs. 1 S. 3 Nr. 5 S. 6 EStG).
Case in dispute: Ambassador abroad with a second household
In the year in dispute, the plaintiffs were assessed jointly as spouses. In that year, the plaintiff worked as an ambassador for the Federal Republic of Germany, first in the Republic of A and then in the Republic of B. During his term of service, an apartment was made available to him in both countries of employment (in A: 249.22 sqm and in B: 185.62 sqm). However, a so-called official residence remuneration was withheld from the taxpayer's salary. Accordingly, the taxpayer claimed the withheld expenses for the foreign accommodation in his tax return as income-related expenses for a second household. Contrary to the taxpayer's view, the tax office relied on the social-law minimum standard of 60 sqm for domestic apartments in the case of a second household and therefore allowed a deduction of income-related expenses only on a pro rata basis for 60 sqm.
BFH ruling: Expenses for a second household abroad to be fully recognised
In its ruling, the BFH agreed with the taxpayer. The court reasoned as follows: it is accepted that, on social-law grounds, accommodation costs in connection with a second household are subject to a standardised minimum of 60 sqm for domestic apartments. However, this standardisation cannot be applied to foreign housing standards; rather, an adjustment must be made to the specific conditions of the respective country. Furthermore, domestic authorities cannot reliably determine average rents for foreign minimum housing standards, with the result that the actual deduction of income-related expenses (necessary accommodation costs) for a second household abroad must be assessed on a case-by-case basis. The withheld expenses for the second household abroad are therefore to be recognised in full when determining the taxable income in this case.
Frequently asked questions
Frequently asked questions
Does the EUR 1,000 cap on double household management also apply abroad?
No. The monthly cap of EUR 1,000 under § 9 Abs. 1 S. 3 Nr. 5 S. 4 EStG applies exclusively to accommodations within Germany. For a double household maintained abroad, the actually necessary accommodation costs are deductible as income-related expenses.
Can the 60-square-metre threshold be applied to foreign secondary residences in cases of dual household maintenance?
No. The BFH has ruled that the 60-square-metre standard, recognised on social-law grounds, applies only to domestic residences. For foreign residences, country-specific conditions must be taken into account, since German authorities cannot reliably determine average rents based on foreign standards.
How are accommodation costs treated for tax purposes in cases of a second household abroad?
The assessment is made on a case-by-case basis. The decisive factor is the actually necessary accommodation costs, taking into account the housing conditions in the respective country of employment. A flat-rate floor space limit, as applied domestically, does not apply.
Can accommodation costs be deducted if the employer provides company housing?
Yes, provided the employee actually bears a financial burden, for example through a company housing charge withheld from their salary. If, however, the costs are fully reimbursed by the employer or the housing is provided free of charge, a deduction as work-related expenses is not possible.
How many family home trips per week are deductible under a dual household arrangement?
One family home trip per week between the residence and the primary place of work is deductible, even if the taxpayer commutes more often (§ 9 Abs. 1 S. 3 Nr. 5 S. 5 EStG). EUR 0.30 may be claimed per full kilometer of the one-way distance.