The 3-Months Rule for Per Diem Expenses in Germany

As daily per diem expenses are only considered tax-free for a maximum of three months of continuous travel to the same location, any allowances granted for stays lasting longer than that will be subject to taxation. This rule applies to employees working for companies based in Germany.

This article is also available in German: Die 3-Monatsregel für Tagespauschalen in Deutschland.

With this feature you have two options to choose from: Either a warning will displayed or a taxable rate applied.

  • If you choose the warning option, a warning will be displayed to the admin every time a per diem expense exceeding the 3-months limit is submitted.
  • If you choose the taxable per diem expenses option, per diem expenses in connection with travels to the same location for more than three months will be posted as taxable.

To enable the 3-months rule for per diems, follow these steps:

  1. Choose the Search icon, enter Expense Management Setup, and then choose the related link.
  2. On the Per Diem FastTab, in the Enable 3-Month-Rule field, select one of the following options on the dropdown menu:
    • Warning on Per Diem - a comment will be displayed to the admin in Business Central when an employee has submitted per diem expenses for more than three months, calculated as 90 days at the same location
    • Taxable Per Diem - per diem expenses in connection with travels to the same location (address code) for over three months with will be posted as taxable. Note: You will be asked if you want to enable taxable rates (required for this feature) for per diem expenses after choosing this option. You must also set up taxable per diem rates for this option to work.

Once the 3-months rule is enabled, the Address Code field will be added to per diem reporting in the Continia Expense App and the Continia Expense Portal.