Freelancers or self-employed people who work in a different location to where they live and rent a second flat there often hope to be able to claim all the associated costs for tax purposes. The Federal Fiscal Court has now clarified the limits of the business expenses deduction for journeys home to visit family when maintaining two households. The judgement of 19 May 2026 (Ref. VIII R 15/24) applies to all self-employed people who regularly commute between two places of residence.
The case: a self-employed person with two places of residence
A self-employed claimant had his main residence in the town of K. However, he worked almost exclusively for a single client in the distant town of H, where he was based four days a week. He also rented a flat there. For his journeys, he used a leased vehicle, more than 50 per cent of the time for business purposes.
In his calculations of taxable profit, he claimed the rent for the second flat and all vehicle costs as business expenses. However, the tax office only recognised the travel expenses up to the amount of the mileage allowance and also reduced the additional meal allowances. The claimant took the matter to court but ultimately failed before the Federal Fiscal Court (BFH) as well.
What the Federal Fiscal Court ruled
The court first clarified when a self-employed person is deemed to be maintaining two households. The prerequisite is that they maintain a separate household outside the place where they carry out the main part of their work, whilst also residing at the place where the main part of their work is carried out. In any event, the main place of business is where the sole business premises, within the meaning of the Income Tax Act, are situated.
In this specific case, this was clearly the town of H, as that was where the claimant’s sole permanent business establishment was situated. The journeys between H and K were therefore not ordinary business trips, but rather so-called journeys to the family home within the meaning of Section 4(5), first sentence, number 6 of the Income Tax Act (EStG). For tax purposes, such journeys may only be deducted up to the amount of the mileage allowance, but not in full against the actual vehicle costs.
What a permanent establishment means in this context
The Federal Fiscal Court (BFH) also emphasised that the concept of a permanent establishment for self-employed persons must be determined on its own merits and not in accordance with the rules that have applied since 2013 to employees in relation to their so-called ‘primary place of work’. For self-employed persons, it remains necessary that they visit a fixed, permanent business establishment not merely occasionally, but regularly and on a continuous basis. The key factor, therefore, is the actual, location-specific centre of their business activities.
What this means for the self-employed
The ruling has practical implications for all self-employed people and business owners who regularly work in a location other than where they have their main place of residence and use a second accommodation there.
- Journeys between a second home at the place of work and the main residence are regarded as journeys to the family home and are only partially tax-deductible.
- A full deduction of actual vehicle costs for such journeys is not permitted where the taxpayer maintains two households.
- Whether a person actually maintains two households and where the main focus of their work lies depends on the specific circumstances of each individual case.
Anyone in a similar situation who is unsure how to classify their expenses correctly should have the tax treatment carefully reviewed. Incorrect classification can lead to substantial additional tax payments in the event of a tax audit.
Source: BFH press releases
This post and the accompanying image were created with the help of AI and have been editorially reviewed.
