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Created on Friday, 23 January 2009 17:14

Last Updated on Friday, 28 December 2012 18:52

Commuting Allowance - now Reinstated by BVerfG

Good news for commuters: The Federal Constitutional Court decided against the German government on December 9, 2008 (re 2 BvL 1/07, 2 BvL 2/07, 2 BvL 1/08 und 2 BvL 2/08) on the commuting allowance (Pendlerpauschale). But what does this mean for you? We will tell you!

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For the fiscal years 2007 and 2008, German parliament passed a statutory provision that the commuting allowance is not applicable for the first 20 km distance to work. BVerfG ruled this statutory provision as unconstitutional and therefore null and void. Now, as previously, you can deduct the full distance to work as professional expenses. This affects employed, self-employed, and employees equally. The trips between home and work are not considered as private expenses anymore and therefore deductible. Now again, deductions count from the first kilometer.

This is true - even if you commute via ÖPNV or per bicycle.

Employers can now again treat their employees with a wage tax-free grant for travel costs within the first 20 km between home and work. However, the employer will have to pay the flat income tax on this part of the employee's income. This is also applicable to flat amounts for company cars that are allowed to be used between work and home.

The income tax assessments 2007 were enacted without considering the costs for the first 20 km. However, simultaneously the fiscal administration automatically issued these assessments as temporary upon order of the Federal Ministry of Finance. With the Federal Constitutional Court's decision, these assessments will now be automatically corrected. Only such commuters have to become active that did not deduct these commuting costs in their tax return because e.g. they only had to travel less than 20 km.

Recommended Actions:

• In the case you have a personal exemption on your tax card (Freibetrag auf der Lohnsteuerkarte), then you have nothing to worry about. However, most persons will be credited when they file a tax return. This deduction will only have an effect, when either the commuting costs alone or together with other professional deductions exceed the statutory flat rate of € 920 (in 2009)
• Self-employed have to adjust the P&L ´ ins Glossar´ compution. This will be no problem for 2008. For the fiscal year 2007, these persons will have to apply for correction as the tax office usually cannot see how the costs occurred in their computers.
• Due to the statutory limitation the flat income taxation for employer services (grants for traveling costs and monetary advantages) in connection with traveling between home and work were not permissible anymore. A subsequently flat taxation for the once again permissible commuting allowance is even in spite of the unconstitutionality not possible because the wage taxation period for the employer is over. At least for 2009, the employer can continue with these treats for her employees.
• In the case, the employer paid wage tax for the first kilometers, the employee can neutralize this incorrect "prepayment" by deducting a commuting allowance for the same amount.
• Parents will receive child benefits again when the commuting allowance from the first kilometer when their adult child falls below the exempt income sum of € 7,680. Since the Familienkasse only temporarily assessed child benefits since mid January 2008, changes will be computed ex officio. Entering a caveat is not necessary. It is recommendable not to do so because this will only prolong the correction proceedings and the officers already have enough to do. However, you should not wait more then six months.

Compute your Communting allowance right here and now!

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