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This article was written by
German Public Auditor, Certified Tax Advisor, Partner, Tax & Legal
Certified Tax Advisor, Director, National Office Tax & Legal/Quality Assurance
The classification of travel expenses for professional vehicle use repeatedly gives rise to discussion: Are the actual expenses deductible, or does only the distance allowance apply for journeys between the home and the first place of work or permanent establishment, irrespective of the actual costs?
In two decisions, the German Federal Fiscal Court (Bundesfinanzhof; BFH) had to address the deduction of business expenses for travel costs incurred by a self-employed person. At the core was the question of the permanent establishment of a self-employed person. In this respect, the BFH first confirmed that, for taxpayers determining profits, the concept of a permanent establishment is not predetermined by the concept of the first place of work for employees, but must, as before, be determined independently on a rule-specific basis. A permanent establishment within this meaning (Section 4 (5) sentence 1 no. 6 sentence 1 of the German Income Tax Act (Einkommensteuergesetz; EStG)) requires a fixed, permanent business facility which the taxpayer visits not merely occasionally but with a certain degree of regularity, i.e. continuously and repeatedly, in order to carry out their professional activity; the geographically fixed centre of the activity intended to be carried out on a permanent basis must be determined.
In the BFH decision dated May 19, 2026 (case no. VIII R 15/24), the claimant worked as a freelancer and was resident in K. During the period in dispute, he worked almost exclusively for a client at its registered office in H; he performed his activity there four days per week. In H, the claimant also rented an apartment. For his private and business journeys, the claimant used a leased vehicle that was used more than 50% for business purposes in the years in dispute. In his profit determinations, in addition to the rental expenses for the apartment in H, he claimed the vehicle expenses in full as business expenses and recognised withdrawals for private journeys.
The tax office did not recognise the claimed expenses beyond the distance allowance and reduced the additional meal expenses. The fiscal court and subsequently the BFH confirmed this view.
The self-employed claimant had his only permanent establishment in H. This also means that the claimant performed his activity primarily in H. Accordingly, in the years in dispute, the claimant maintained a business-related dual household in H. A dual household of a self-employed person exists only if the person maintains their own household outside the place where they primarily perform their activity and lives at the place where they primarily perform their activity. The journeys between K and H were to be classified as family trips home, which can only be considered by means of distance allowance. The additional meal expenses deductible as business expenses were also to be limited to the first three months of the dual household. Additional meal expenses for the claimant’s stays outside H and K were recognised in addition.
In the BFH decision dated June 23, 2026 (case no. VIII R 13/24), the claimant, as a maritime pilot, earned income from self-employment. In the majority of cases, the claimant’s pilotage assignments began at landing stage D in his pilotage district. The claimant had rented a permanent parking space near the landing stage. He drove there in his own car. From there, he transferred by boat to the vessel to be piloted, which he generally left again at pilot station K. In most cases, following such a pilotage assignment, the claimant was also assigned to a “return pilotage” for an incoming vessel. He regularly spent the varying waiting times between pilotage assignments at pilot station K. In addition to his actual pilotage activity as a so-called navigational pilot, the claimant performed radar services at radar station K on two days per month in the years in dispute.
The claimant successfully sought before the fiscal court full recognition of the expenses for his journeys from his home to the individual pilotage assignments, as well as additional meal expenses, as business expenses. The BFH confirmed the decision. The claimant had no permanent establishment. Therefore, the deduction of business expenses for the travel expenses was not to be limited to the distance allowance.
To the extent that, in the past, the BFH recognised a large-scale permanent establishment in connection with the activity of maritime pilots in the respective pilotage area or pilotage district, it no longer maintains this position under the travel expenses law for employees as amended since 2014. In the past, the concept of a permanent establishment could be understood so broadly that it could also include an area in which the pilot works on a permanent basis, provided that there was also a business facility in that area which the pilot visited at least temporarily. This possibility has ceased to exist because of the amendment to the travel expenses law for employees.
Notice:
The concept of a permanent establishment (within the meaning of Section 4 (5) sentence 1 no. 6 sentence 1 EStG) is not predetermined by the concept of the first place of work but must, unchanged, be determined independently on a rule-specific basis. Nevertheless, the travel expenses law for employees as amended since 2014 has an impact in this respect, as, in principle, employees and taxpayers determining profits are to be treated equally for tax travel expenses purposes. In this respect, the extensive case law on the amended travel expenses law for employees may also have implications for taxpayers determining profits.