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I live and work in Germany. For the next six months I am going to work at a temporary external activity ("beruflich veranlasste Auswärtstätigkeit"). German tax laws offer the possibility to reduce ones taxable income in such situations for various reasons.

  • Travel expenses (0,30€ / km)
  • additional meal allowance (12€ / day for the first three months; Verpflegungsmehraufwand)

In both cases it is allowed to either reduce the taxable income by a fixed allowance or to get the same amount paid tax-free from the employer. I am now wondering which option would be better for me from a financial viewpoint. Unfortunately German tax laws are very complicated and I cannot simply calculate the difference of both options upfront (or at least I don't know how). If I choose the tax deduction option I would have to pay for the travel expenses by myself, of course.

  • I find it hard to believe that the choices are reduce taxable income or receive the same amount tax free. Why would anyone ever not choose the payment? – TTT Aug 1 '16 at 2:02
  • I guess not all companies offer to pay the allowance for example. Furthermore it makes a difference for social security I believe – sigy Aug 1 '16 at 17:30
  • German law allows your employer to pay you tax-free per diem of 24 € for "full days" and 12 € for "half days". After three months, all paid per diem are fully taxable. – Peter Wippermann Aug 10 '16 at 13:04
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It should be very obvious that getting X Euro cash in your hand is better than deducting them from taxable income.

You would need to have a tax rate of over 100% to do better otherwise.

  • Is it really that easy? What about the influence on social security? Can I get paid the full amount even if the actual costs are less than 0,30€ / km? – sigy Aug 1 '16 at 17:33
  • You get reimbursed whatever the company decides to reimburse you, between 0 and infinity. You can, however, any part that the tax authorities accept and the company did not reimburse you, deduct from your taxable income (may not be worth the effort, but you can). On the other hand, if the company reimburses you above the tax authorities rates (not likely to happen), you would need to pay taxes on that additional 'income'. – Aganju Aug 1 '16 at 18:38
  • @sigy Reimbursed travel expenses and per-diems (up to 12 € / 24 € a day) don't influence your social security, since they are not seen as your gross pay. – Peter Wippermann Aug 10 '16 at 13:01

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