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Business hospitality expenses – New requirements from the Federal Ministry of Finance

In the Federal Ministry of Finance’s circular, of 30.6.2021, the fiscal authority took into account the developments in digitalisation in the area of hospitality expenses, in particular, the possibility to provide a signature or approval electronically as well as the use of an electronic record-keeping system with a cash register function.

As previously, the mandatory information for entertainment expense receipts, from a VAT perspective, includes, in particular, the tax number or VAT identification number, the date of issue and a sequential invoice number. In future, the exemptions for invoices for small amounts (invoices up to € 250) will also apply for income tax purposes. If a catering establishment uses an electronic record-keeping system with a cash register function, then hospitality expenses will only be permitted as a business expense deduction if the invoice has been automatically generated, recorded electronically and protected against tampering using a certified technical security system (TSS). In the case of digital hospitality receipts, where taxpayers have to keep written proof of the place, day, participants and the reason for the hospitality as well as the expense amount, taxpayers will now be permitted to give required authorisation by means of an electronic signature or by providing electronic approval. The most important proof requirements for digital or digitalised hospitality receipts include, in particular, the requirement for electronic records to be made of the date of the signature or approval, the requirement for an electronic own/internal receipt to be promptly issued with the legally required information and, as guidance, compliance with the ‘Principles of Proper Keeping and Retention of Accounts, Records and Documents in Electronic Form as well as Access to Data’ (Grundsätze zur ordnungsmäßigen Führung und Aufbewahrung von Büchern, Aufzeichnungen und Unterlagen in elektronischer Form sowie zum Datenzugriff, GoBD). This also includes the need for the process that is used in each case to be described in the process documentation. 

Please note: With respect to hospitality abroad, the circular states that there is basically no difference when compared with hospitality rules for Germany. There are however exceptions depending on the applicable requirements abroad.

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