As a rule, self-employed people can only deduct their travel costs from home to work as business expenses up to the amount of the mileage allowance. However, this only applies if they have a so-called Permanent establishment for the purposes of travel expense regulations have. In a recent judgement, the Federal Fiscal Court has clarified the conditions under which such a permanent establishment can be deemed to exist in the case of self-employed persons, thereby expressly departing from its previous case law.
What was the case about?
A maritime pilot earned income from self-employment. His pilotage assignments predominantly began at a specific landing stage within his pilotage district. He had rented a long-term parking space nearby, from where he would transfer to the vessels requiring pilotage by boat. He spent the waiting times between assignments at a pilot station, whilst at another location he carried out radar duties twice a month.
The tax office was prepared to recognise the pilot’s travel expenses only up to the amount of the mileage allowance, as it assumed that a permanent establishment within the meaning of the Income Tax Act existed. The pilot took legal action and was successful before the Tax Court. The Federal Fiscal Court has now confirmed this ruling in its judgement of 26 March 2026 (case number VIII R 13/24).
What is a permanent establishment for the purposes of travel expense regulations?
Under Section 4(5), first sentence, point 6 of the Income Tax Act, the travel expenses incurred by self-employed persons in travelling to their place of business are limited to the mileage allowance, i.e. 30 cents per kilometre for a single journey. The term ‘place of business’ in this context is to be understood in a narrower sense than, for example, in trade tax or tax law.
The Federal Fiscal Court (BFH) clarifies that such a permanent establishment requires a a fixed, permanent business establishment, which the taxpayer visits not just occasionally, but regularly and on an ongoing basis. The decisive factor is that this is the geographically defined centre relates to professional activity. Merely carrying out auxiliary or ancillary tasks is not sufficient for this purpose.
Why did the maritime pilot not have a permanent establishment?
The Federal Fiscal Court ruled out the existence of a permanent establishment in respect of all the locations under consideration. The long-stay car park served only to carry out ancillary activities. At the pilot stations, the pilot likewise carried out only ancillary activities or waited to be called upon. The vessels to be piloted themselves, being fixed installations, are in any case not eligible.
The pilotage area as such is also ruled out. Here, the Federal Fiscal Court (BFH) has expressly reversed its previous case law: in the past, it had still regarded the pilotage area as a so-called large-scale facility recognised. He no longer maintains this view, as the amended tax legislation on travel expenses from 2013 aims to ensure equal treatment in principle between employees and the self-employed. Under comparable circumstances, a ‘primary place of work’ covering a wide area is also not an option for employees.
What does this mean in practice for the self-employed?
The ruling is of particular interest to self-employed people who do not have a fixed place of work in the traditional sense and whose work is carried out at various locations. If they are unable to prove that they have a permanent establishment within the meaning of tax law, they may claim their travel expenses as business expenses, calculated on the basis of the kilometres actually travelled and at full cost. Additional meal expenses are also deductible under certain conditions.
Whether your own situation is comparable to the case in question depends on the specific circumstances. It is advisable to seek tax advice in order to record travel expenses correctly and avoid tax penalties in the event of a tax audit.
Source: BFH press releases
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