Travel Allowance (Fahrkostenzuschuss) and Taxation in Germany explained

Main points

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• The travel allowance is a salary supplement that you grant your team for the journey to work - regardless of which means of transport they choose. 
  
  It is paid at a rate of 0.30 euros per kilometer (0.35 euros per kilometer from the 21st kilometer onwards) for the one-way journey between home and work, and only for the days on which your employees are at work.

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• For whom. The travel allowance is available to all full-time employees, part-time employees, trainees, and mini-jobbers on a 520 euro basis. 
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• A complement to your employer branding strategy. The travel allowance is a mobility benefit and is suitable as a retention tool, especially for employees who live further away.
  
  
• Accounting & taxation. The allowance is a salary supplement and is paid out with the monthly salary.
  
  Travel allowances are taxed at a flat rate of 15% wage tax.
  
  
• What to look out for. The allowance can only be paid to employees who regularly commute to work and in many cases, there is an annual cap of 4,500 euros (the same cap as for income-related expenses).
  
  In addition: If you grant your employees a travel allowance, they can no longer claim these costs as income-related expenses in their tax return.

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What is the travel allowance? 

Here is our explanation and definition:

• The travel allowance is a monthly payment with your salary that you grant to your employees to compensate them for the costs of traveling to work.
  
  The travel allowance applies to all means of transport used for commuting to the office.
  
  
• Your team member is free to choose how they get to work, whether by bus, train, bicycle, or car. Important is that only the days on which your employees actually commute to work are taken into account.
  
  The allowance covers 0.30 Euro paid per kilometer, if your team member travels beyond 21 kilometers the compensation is 0.35 Euro per kilometer.
  
  
• All employees who regularly come to the office to work can receive a travel allowance, i.e. full-time and part-time employees as well as trainees and mini-jobbers.
  
  For full-time employees in your team who usually commute to work every day, the allowance can be applied for 15 days per month without further proof, according to the law.
  
  
• As a salary bonus, the travel allowance is paid out with the salary and taxed at a flat rate of only 15% wage tax. If your team works in the home office every day, you cannot pay your team a travel allowance.
  
  
• If your team comes to the office e.g. for two days a week, you can also grant the allowance to your team for these two days only.

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For whom is the travel allowance worthwhile?

As with other mobility benefits, the travel allowance generally increases motivation and satisfaction at work and is thus an important employee retention tool.
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For employees who live far from their workplace, the travel allowance is particularly valuable. As a general rule, travel allowances are worthwhile for distances greater than 17 kilometers.

Many employees benefit from flat-rate wage taxation of 15%. As a monthly supplement to their salary, the travel allowance offers your employees the convenience of not having to wait until the end of the year or until their tax return to receive reimbursements. 

This is how travel allowances are taxed and accounted for: If your employees are entitled to a monthly travel allowance, they can receive 0.30 euros per distance kilometer (0.35 euros from the 21st kilometer), which is the otherwise deductible distance allowance. As an employer, you are responsible for paying the 15% flat-rate wage tax. 

The travel allowance does not require social security contributions. To calculate the amount of the allowance, you use the shortest or most convenient route between your employee's place of residence and your company's office location. 

If you decide to pay your employees a higher amount than € 0.30 per distance kilometer or to grant them an allowance for days on which they worked in their home office, this additional benefit is subject to the individual tax rate of your employees. 

If you decide to offer your employees an additional mobility budget, this can be granted as a benefit in kind up to 50 euros per month tax-free (or taxed at a flat rate) on top of the salary. 

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What about if your employees only use public transport? 

In this case, it makes more sense to offer a public transport-specific allowance, e.g. a job ticket. Since 2019, the job ticket can also be subsidized above the upper limit of the tax-free benefit in kind of 50 euros. 

In this way, the tax-free benefit in the kind of 50 euros can be used for other mobility benefits, such as a flexible mobility budget. 

With the job ticket, you as an employer provide your employees with free or discounted monthly tickets for public transport, which can be used not only for commuting to work but also for private journeys. 

With regard to the tax return, it is important to note: If your employees receive a travel allowance, they cannot claim income-related expenses for travel to work in their tax return. 

A travel allowance is therefore only attractive for your employees if the distance between home and work is at least 17 kilometers.

What is the difference between the travel allowance and the commuter allowance?

The travel allowance is not the same as the commuter allowance.
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While the travel allowance is a voluntary offer from you as an employer, the commuter allowance is a state offer to your employees and offers them the possibility to deduct their travel costs from their taxes.
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What both offers have in common is the amount of 0.30 euros per kilometre (or 0.35 euros from the 21st kilometer).

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Travel allowance and other mobility benefits

The travel allowance is a mobility benefit and thus an effective instrument for employee retention as an additional benefit to the salary.
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You can offer the allowance to your employees either as a single mobility benefit or together with others, such as a flexible mobility budget.
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If you grant your employees a higher amount than the already mentioned 0.30 euros per kilometer or offer them a credit in the form of a mobility budget for the use of public transport or sharing offers (e.g. car sharing, bike sharing, e-scooter sharing), your employees pay the individual additional wage tax.

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In contrast to a mobility budget or a job ticket, the travel allowance is transferred directly to your employee's bank account as a monthly salary supplement. This means that your employees have this amount at their free disposal.

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Information and content disclaimer

NAVIT hereby states that the information provided about benefits on our website is only for informational purposes only and does not represent any tax or legal advice.

The content is not intended to replace any individual, binding tax and legal advice that addresses your specific tax or legal situation. We, therefore, declare that information provided is without guarantee of correctness and completeness.
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We continue to provide updated information and research insights.

We as a provider of this information cannot assume any liability for the accuracy, completeness, and timeliness of the information provided. In particular, the information is of a general nature and does not constitute tax or legal advice in individual cases.

For questions about taxes and legal topics, please consult a certified tax advisor or lawyer.

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