RTW for business travel vs. German taxes
 

Hello,

does anyone living/working in Germany book RTW for business trips? It is sometimes less expensive than return trip fares in C and has a few other advantages as well :D

Do German tax authorities make trouble with RTW tickets as a business expense?

Thanks!

Why should they "make trouble" ? As long as you can justify your travels through business, i.e. revenue from these trips (directly or indirectly). I regularly claim RTW tix as a tax deductible expense in C or F.

I would however not recommend to book a RTW with loads of exotic locations like the pacific islands if you cannot document any business there.

There is a certain problem with German taxes. If you book:

FRA - NYC (for business)
NYC - SFO (pleasure)
SFO - NRT (for business)
NRT - FRA (for business)

the tax authorities shall/should/will conclude that part of your travel was leisure and will devide the full ticket price into a leisure portion and a business portion. I agree to Rambuster that you CAN declare everything as business. You should find a good reason for a business visit (based on the above itinery) for SFO, too. Easy with SFO, but might become difficult with some exotic places. My (in general BKG or CAI travel agent issues me in invoice mentioning the major stops (or what I understand to be the major stops) of my trip. Never had any problems - I never understand a strange island to be a major stop.

Thanks for the replies, looks like it should not make more troubles with the German tax system than usual ;)

The problem are extra stopovers or stays required by the RTW fare rules (e.g. minimum 3 stopovers/10 days on a Star RTW), but not by your business. German tax authorities love hunting for hidden private expenses and might assume that those stopovers are for private travel and thus not all of the trip costs are tax-deductible. Can an extra stopover with the sole purpose of reducing the cost of the trip be claimed as a business expense?

The idea with the invoice from the travel agent is a good one, thanks a lot!

Just fly enough so that no one (not even yourself) understands where you are.

Keep in mind that it might raise the suspicion of the German tax authorities if you do not claim per diems for your exotic business destinations.

No, even the utilization of a "Sunday return rule" will cause the fiscal authorities to split the costs into a deductable and non-deductable portion if you only deliver the argument that you spent the Sunday window shopping to save costs.

Though, the taxman will have no chance it you (claim to) visit a potential customer in Bora-Bora, have to visit a potential supplier in HNL or start as a self employed architect studies of the SYD harbour bridge. As soon as you can give a sound reason (and run a real business) there will not be too much question. In general they have no way to verify it and as long as your reasoning is at least coherent they will buy it.

It all changes if you are - let me say work as history teacher - and try to make a RTW a tax deductable because you argue you had to inform yourself about history teaching all around the globe...

Also, if you can provide revenue invoices related to your travel destinations this takes the wind out of any tax inspector.

if the RTW price is cheaper than the roundtrip C fare, i don't think there would be a problem.

If this is not the case, i am not sure what would happen....

actually, at least with the tax inspectors who "visited" me till now, they never cared about the price.

I've been arguing with him about a trip NUE-HAM-NUE on a sunday (99 euros) but he didn't care about a 8k Euro trip to DEN. as mentioned by other posters, it's only necessary that you have a good reason and can back it up somehow (i just showed him the agendas for the appointments in question).

No, as Flying Lawyer pointed out a cheaper price is not a valid reason. If you use this argument you will quickly run into trouble about parts of the trip being private 8or even all...). This is why I have never stopped over on transpacs in Hawai'i as I couldn't back up such a stopover with a waterproof "alibi" (not that HNL is worth a stop anyway)

Correct. Tax law has no ambition to be comerically sound but it differenciates between your (tax-neutral) private life and your (tax-relevant) business life. Saving money is neither private nor business.

The taxman will ask what portion of the journey was private and what portion was business and can split the costs into a deductable and a non-deductable portion. You can get away even with HNL if you have business from Monday to Friday in the US, fly over to HNL and fly to the far East Sunday night to continue business there the following week. German tax office does not expect you to fly home in between.

Nontheless, I prefer to have meetings either with one of my colleagues from our 2000+ lawyers firm or with outside counsel or potential clients. Luckily enough my business is international enough to find always an alibi for every place on this wonderful globe and the German tax office will never be in any position to review whether the person I obviously met in HNL was really of any importance for my business (of course, legal business is people business and every contact can be important).

You pay taxes in Germany ? ;)

I guess with your travel profile (i.e. outside any country more thasn half the year) you could get away with paying taxes somewhere less "expensive" - provided your employer plays along ...

Inter alia I do. Most international law firms are structured as "tax transparent" partnerships. Having said so, income is not taxed at partnership level but at the level of the individual partner. As a result, a partner has to pay taxes on different portions of the income where such income occurs (eg. Poland. Germany, UK, France, Italy, US, China).

This brings along one big benefit if you consider the two Germans terms "Progression" and "Grundfreibetrag", instruments which are available in most jurisdictions.

My personal business expenses (or: Sonderbetriebsausgaben, most of it cost for further education or personal BD) are relevant for my German tax bill because I decided to keep residence for more than 180 days a year in Germany so these discussions are not really new to me. Firm related business travel is accounted for at partnership level. Tax authorities follow the principle that everything will be considered as business related what has been reimbursed by the partnership.

How about this: issue the original RTW with only real business destinations (FRA-JFK-SFO-NRT-SIN-FRA for example), and use the invoice from that original issue for tax purposes. Then later on re-issue the ticket with additional sectors without ever telling the tax authorities about it.

You can always claim the minimum stop over rule (so you HAD to stop-over in Fiji or the minimum travel time (and that's why the stop in Fiji was one week)