Freelancer’s Travel Expenses—Did You Know About These 3 Deductibles?

Freelancers often don’t deduct all travel expenses they could

Freelancers often don’t use all deductions related to business travel they are entitled to. This article explains the basic principles and elaborates on the most common “forgotten” deductions.

Travel expense in Austrian tax law

Travel expenses have the same legal definition for self-employed freelancers as for employees. This has some interesting effects. For instance, it may sound surprising that a freelancer can deduct per diem allowances for food and beverages that they quasi pay to themselves. The travel expenses can be generally split into five categories:

  • Transport exepenses (e.g. flight tickets)
  • Mileage allowances, if transport with a private vehicle (EUR 0,42/km)
  • Per diem allowances for food and beverages (EUR 26,40/day for domestic travels)
  • Lodging exepenses (e.g. hotel expense)
  • Lodging allowance, alternatively to lodging expense (EUR 15,00/night in Austria)

Broadly speaking, these expenses are deductible only if the travel fulfills the following requirements:

(a) related to business,
(b) with at least 25 km distance from the usual place of work and
(c) over 3 hours long.

freelancer travel expense deductible tax

Per diem allowances

Obviously, if you are self-employed you don’t have an employer giving you an extra per diem allowance for your daily coffee. That however does not mean that you can’t deduct such allowances from your taxable income just as your employer would. By principle, per diem allowances also apply to travel for training and educational purposes—as long as related to the business activity.

Unfortunately, calculating the deductible per diem allowance is somewhat of a math problem. In Austria, the allowance is EUR 26,40 per day (note—check current amount). However if your travel took place in let’s say Finnland, it’s EUR 41,40 (see overview per country). If the travel is longer than 3 hours (see general requirements above) 1/12th of the daily allowance can be considered for every hour started (so for travel in Austria EUR 2,20). These small amounts often sum up to a surprising number over the year.

It is important to note that per diem allowances are not unlimited. By principle, they can be deducted only for the first five days of stay at the same location (exceptions apply). When abroad, a difference amount between 150% of the allowance for Austria (1,5 x 26,40 = 39,60) and the daily allowance at the destination can be deducted also after the first five days. So in Finland for instance an allowance of EUR 1,80 per day is still allowed (EUR 41,40 – 39,60 = 1,80) even if the first five days have already passed.

You can read more about the exceptions to the 5-day rule in the tax guidelines
(see links in the “Read more” section below)

Meals with promotional character

For many freelancers, a business meal is far from common practice, but much more likely to happen during a business trip than otherwise. General rules apply to meals with promotional character also during business trips (deductible to 50%)—such meals however lower the deductible for the per diem allowance. For example lunch with a potential business partner in Austria will lower the per diem by 1/2; if this lunch takes place abroad then by 1/3. The common issue is a missing receipt or even the notion that such a meal took place.

Don’t forget the receipt.

VAT reimbursement for domestic allowances

Normally, a domestic invoice with VAT entitles a VAT subject to a tax credit (or a reimbursement of the input VAT). In the case of allowances, however, there is no invoice to show, as these amounts are determined by the law. Nevertheless, a VAT claim for the domestic allowance is allowed. This means that on top of the income tax-deductible, a VAT claim is allowed. The VAT reimbursement amounts to EUR 2,64 for a daily per diem allowance (10%) and EUR 1,36 for a lodging allowance (at a mixed tax rate).

Conclusion

The deduction of travel expenses is often not utilized to the maximum. The most common reason is the amount of administrative effort and forgotten receipts. This article sums up three often forgotten deductibles: per diem allowances, meals with promotional character, and VAT reimbursement for lodging and per diem allowances.

Please note that this article is illustrative and cannot provide all specifics regarding this topic. Your case may differ. We always recommend consulting an experienced specialist before making decisions.

Read more

  • Austrian Ministry of Finance, Income Tax Guideline on business travel in Sec 1378 – link
  • Austrian Ministry of Finance, Employee Tax Guidelines on business travel in Sec 278 ff – link
  • Austrian Chamber of Commerce, Tax treatment of business travel – link
  • Austrian Chamber of Commerce, Deductible allowances for travel per coutry – link

Did you like this post?

Did we forget a topic you’re interested in? Did we get it right?
Please leave a comment or send us a message—we love hearing from you!

0 0 votes
Rating
0 Comments
Inline Feedbacks
View all comments
0
Would love your thoughts, please comment.x
()
x