4 Min.

Operating expenses in the tax return (Betriebsausgaben)

Operating expenses can be defined as costs triggered for operational reasons in any kind of business setting.

In oftentimes, self-employed, companies and freelancers come across the term “Betriebsausgaben” in the business world which may be a challenge to interpret or get the full definition of what that term means or translates.

Those already in existence in business are already challenged with this at the start as business expenses may be tedious when it comes to the amount of money they use over time. Without any achievement of sales at any given point when the business is running, this money usually has to be taken in advance but according to the tax laws, business expenses are defined in simple terms as those “cause by operation” (Aufwendungen, die durch den Betrieb veranlasst sind). Nevertheless, such a definition does not necessarily offer any assistance to one looking for answers to quench their curiosity.

As such these article addresses the issues of what expenses on operations are (Betriebsausgaben), the manner in which they are handled when it comes to tax returns (Steuererklärung) and how they impact profits and revenue. Having known this and getting a grasp on the business expenses, let’s start to define these complexities to have a clear picture to understand more.

  • Did you buy a laptop or a mobile phone?

  • Did you move last year for work?

  • Did you work less than 12 months last year?

  • Was your work commute more than 30 minutes?

  • Are you married with tax class III/V?

  • Did you pursue a further education?

  • Did you receive self-employment income?

You are required to file a tax return.

Filing your tax return is worth it! You will most likely get a very high tax refund.

You can expect a high tax refund.

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How can you define business expenses (Betriebsausgaben)?

In a simple definition, operating expenses (Betriebsausgaben) can be defined as costs triggered for operational reasons in any kind of business setting. Therefore, these expenses are assignable to the actions the company undertakes at any given point for the functioning of any business. This could mean that money and also at times, goods can drain during operations. In this case, we can conclude that business expenses are most of the times connected to the business, the freelancer or better yet the self-employed in any setting.

Profits and offset revenues are often reduced by in-house expenses. Ironically, the tax offices (Finanzämter) are not always on the same page when it comes to which costs are recognized and which ones are really not recognized which brings a conflict of interest and maybe unclear for those in business.

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Here are a few practical examples (Betriebsausgaben)

Deductible business expenses (Betriebsausgaben)

  • excipients
  • supplies
  • raw materials
  • Rental costs
  • Wages and salaries
  • product purchases
  • Land or real estate
  • machinery
  • External services (this may include tax consultants and others)
  • building
  • material costs
  • personnel costs
  • fleet
  • depreciation
  • office supplies

Non-deductible business expenses (Betriebsausgaben) may include:

  • Customer gifts of more than 35 euros a year
  • fines
  • Expenses for which no trade was registered for (guesthouses etc.)
  • administrative fines
  • Private life expenses.
  • Political contributions among others.

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When do business expenses emerge (Betriebsausgaben)?

At any given point, business expenses (Betriebsausgaben) can emerge in any setting which one needs to be prepared for when inevitable. But contrary to many beliefs, many do not realize or are not aware that you can claim some business expenses regardless of their creation prior to the start of the business. As such, it is often highly recommended to keep and maintain bills in order to submit them at any given point when asked to if necessary.

Examples of anticipated business expenses (Betriebsausgaben):

  • legal expenses
  • Formation expenses
  • finance costs
  • Traveling expenses
  • notary fees
  • start-up costs

The highest relevant deductible costs for self-employed may include the following:

  • low-value assets
  • Telephone and internet
  • business
  • occupational insurance
  • typical work clothes
  • Coworking Space
  • missions
  • printers
  • depreciation
  • literature

Conclusion

It is important to understand these costs if involved directly or indirectly in business to establish your profit margin and know more about how the business operates. This will also help save other expenditures, cut certain costs, understand your taxes and effectively run the business more knowledgeable and be more informed in making several decisions.