The travel expense tax rules, which since 2014 have limited the deduction of work-related expenses for employees and civil servants who do not work at a fixed location – such as patrol officers – are constitutional, as the BFH held in its decision of 4 April 2019 – VI R 27/17.
At the same time, the BFH published four further decisions illustrating the consequences of the amended legal framework for other occupational groups – such as pilots, aviation security personnel or employees on fixed-term contracts (BFH, decisions of 10 April 2019 – VI R 6/17, of 11 April 2019 – VI R 36/16, VI R 40/16 and VI R 12/17; all published on 18 July 2019).
Background:
Under tax law, work-related travel expenses of employees are generally deductible as income-related expenses in the amount of the actual costs incurred. However, deduction limits apply to the commute between the home and the place of work or duty. Here, income-related expenses can only be claimed under the so-called distance allowance at a rate of €0.30 per kilometre of distance. The new travel expense rules applicable since 2014 define the place of work or duty as the "first place of work" (previously: "regular place of work").
Under the new rules, the first place of work is determined by the employer's assignment under the employment contract or service regulations (§ 9 Abs. 4 EStG). Previously, however, the qualitative focus of the employee's activity was decisive.
This change is relevant for determining the scope of application of the distance allowance (§ 9 Abs. 1 Satz 3 Nr. 4 Sätze 1 und 2 EStG) and the per diem meal allowances (§ 9 Abs. 4a Satz 1 EStG).
The judges of the BFH further explain:
Case VI R 27/17 concerned a police officer who reported to his station each working day and from there began his patrol and operational duties. His activities at the station were essentially limited to preparing and following up on patrol and operational duties. In his 2015 income tax return, he claimed travel expenses from his home to the police station and additional meal expenses on the basis of the previous supreme court case law applying business trip principles. He assumed that there was no first place of work, since his work was predominantly carried out outside the police station in the field.
The tax office (Finanzamt – FA) only took into account travel expenses up to the amount of the distance allowance. It did not recognise additional meal expenses. The tax court (Finanzgericht – FG) dismissed the claim (see our online news of 12 May 2017). The BFH confirmed the lower court's decision.
Under the new rules, the decisive question is whether the employee or civil servant has been permanently assigned to a first place of work through employment or service-law determinations as well as supplementary agreements and instructions by the employer (or the public-sector employer). If so, the qualitative focus of the employee's activity is – contrary to the legal position in force until 2013 – irrelevant. It is sufficient that the employee (or civil servant) has to perform at least some activities, however limited in scope, at the location of the first place of work. According to the FG's findings, this was the case for the patrol officer with regard to paperwork and pre-duty briefings.
The BFH rejects constitutional concerns about the new rules. The legislator did not exceed its regulatory discretion, since employees can adjust in various ways to the same recurring commute and thereby reduce their commuting costs.
Case VI R 40/16 concerned a female pilot. She, too, unsuccessfully sought to claim travel expenses between her home and the airport as well as additional meal expenses before the FA and the FG, in line with previous supreme court case law on business trip principles (see our online news of 19 December 2016).
The BFH also confirmed the FG's decision in this case.
According to the BFH ruling, flight personnel – such as pilots or flight attendants – who are permanently assigned by their employer under employment law to an airport and perform at least some contractually owed activities on the airport premises have their first place of work there.
Since the pilot had to perform certain activities related to flight preparation and follow-up in the airline's premises on the airport grounds, she had a first place of work there. It was therefore irrelevant that she predominantly worked in international air traffic.
The BFH also notes that a large-scale area with corresponding infrastructure (e.g. an industrial plant, company premises, train station or airport) may qualify as a (large-area) first place of work. Likewise, in case VI R 12/17, the BFH denied the application of business trip principles for travel expenses in the case of an aviation security officer who was deployed across the entire airport premises.
In two further decisions (VI R 36/16 and VI R 6/17, see our online news of 13 December 2016 and 18 January 2017), the BFH ruled in cases of fixed-term employment relationships that a first place of work exists if the employee is to work at a stationary business facility for the duration of the fixed-term service or employment relationship.
If, during the fixed-term period, the employee is reassigned to a different place of work, the latter no longer constitutes a first place of work, so that from that point on the business trip principles again apply. On this basis, the claimant in case VI R 6/17 was successful. The BFH confirmed that the claim had been upheld, so that the claimant was entitled to travel expenses for off-site activity at €0.30 per kilometre driven.
In case VI R 36/16, the matter was referred back to the FG to examine whether stationary facilities exist at all.
Source: BFH, press release of 18 July 2019 on the decisions of 4 April 2019 – VI R 27/17 (police officer), of 10 April 2019 – VI R 6/17 (temporary agency worker) and of 11 April 2019 – VI R 36/16 (dock worker), VI R 40/16 (pilot) and VI R 12/17 (aviation security officer); NWB database
Frequently asked questions
Frequently asked questions
How has the first place of work been determined since 2014?
Since 2014, the decisive factor is the employer's assignment of the employee under employment or service law (§ 9 Abs. 4 EStG). Unlike under the previous rules in force until 2013, the qualitative focus of the activity is no longer relevant. It is sufficient that the employee performs at least a minor portion of the contractually owed duties at the assigned location.
What are the tax consequences of classification as a first place of work?
For trips between home and the first place of work, travel costs are deductible only via the commuter allowance of €0.30 per kilometer of distance. Additional meal expenses cannot be claimed in this case. If there is no first place of work, business travel rules apply, allowing €0.30 per kilometer driven plus meal allowances.
Does a patrol officer have a primary place of work at their police station?
Yes. In its ruling of 4 April 2019 (VI R 27/17), the BFH held that a patrol officer's primary place of work is the police station to which they are assigned under service regulations. It is sufficient that they perform paperwork and pre-shift briefings there; the fact that their main duties are in the field is irrelevant.
Where is the primary place of work for pilots and flight attendants?
Flight crew members who are permanently assigned to an airport under their employment contract and perform a small portion of their contractual duties there (e.g., pre- and post-flight preparation) have their primary place of work at that airport. The fact that they are predominantly deployed in international air traffic is irrelevant. Even a large area such as an airport can qualify as a primary place of work.
Does a first place of work apply to fixed-term employment relationships?
Yes. If the employee is to work at a fixed business location for the duration of the fixed-term employment, this constitutes a first place of work. If the employee is reassigned to another work location during the fixed term, the first place of work no longer applies, and the business travel rules apply again from that point onward.
Is the new regulation on the primary place of work constitutional?
Yes. The BFH has confirmed the reform of the travel expense rules as constitutional. The legislator did not exceed its regulatory discretion, since employees can adjust to the consistently same commuting routes and thereby reduce their travel costs.