Hospitality expenses - New requirements via a circular from the Federal Ministry of Finance
The tax treatment of hospitality expenses has always been a particular focus of external tax audits. In view of the growing digitalisation of the invoicing process and of cash register systems, the fiscal administration has now comprehensively specified its guidelines. However, the latest circular from the Federal Ministry of Finance (Bundesministerium der Finanzen, BMF) provides not just clarifications with respect to e-invoicing but, at the same time, tightens the requirements for electronic record-keeping systems and the documentation of tips.
Scope of application of the new administrative opinion
In the BMF circular, of 19.11.2025 (reference: IV C 6 - S 2145/00026/005/033), the fiscal administration details the criteria for a business expense deduction under Section 4(4) and (5) of the Income Tax Act (Einkommenssteuergesetz, EStG). The previous circular of 30.6.2021 will continue to apply to hospitality expenses up to and including 31.12.2024. The newly revised requirements will be applicable for expenses that arise thereafter and will have to be considered, in particular, in conjunction with the introduction of mandatory e-invoicing for B2B transactions in Germany as of 1.1.2025. Generally, an e-invoice is required for B2B transactions in Germany that exceed the VAT small amount threshold of €250. The determining criterion here is the structured data set and not merely the visual presentation (e.g., PDF).
Different requirements depending on the invoice amount
The BMF continues to distinguish between small amount invoices up to €250 and invoices exceeding that threshold. While fewer formal requirements apply for small amounts, in the case of higher invoice amounts it will be necessary to issue a complete invoice with all the mandatory information. This relates, in particular, to the VAT being shown separately, an unambiguous description of the performance as well as identifying the issuer of the invoice. In cases where no machine-generated hospitality receipt is available - for example, for hospitality provided abroad or at smaller businesses without an electronic record-keeping system - a supplementary internal receipt could be necessary. However, a single written note or a mere beer mat would not be sufficient for claiming a deduction either for business expenses or input tax. A proper invoice as defined in Section 14 of the German VAT Act is always required.
Electronic record-keeping systems and CTSS
The use of electronic record-keeping systems (ERS) is of particular practical relevance; according to Section 146a of the Fiscal Code (Abgabenordnung, AO) these have to be secured with a certified technical security system (CTSS). A machine-generated hospitality receipt would only be eligible for deduction as a business expense if the electronically recorded cash register system data have actually been protected by a CTSS.
Consequently, besides the mandatory information for VAT purposes, the receipt also has to contain the data that are required under Section 6 of the Cash Register Security Ordinance (Kassensicherungsverordnung, KassenSichV). This includes, in particular:
- serial number of the electronic record-keeping system,
- serial number of the CTSS,
- transaction number,
- signature counter,
- verification value,
- start and end time of the transaction.
Since 2024, it has been mandatory for two serial numbers to be shown on the receipt - both that of the record-keeping system as well as that of the security module. If this information is missing, there would a risk that a deduction of business expenses could be refused insofar as no documented evidence of the failure of the CTSS is available. Any such failure must be expressly indicated (e.g., via the message ‘TSS has failed’) and swiftly rectified.
Receipt issuance obligation and individual records
If an ERS is used to record business transactions then, at the same time, the obligation to issue receipts pursuant to Section 146a(2) AO will apply. The obligation to keep individual records requires product-specific entries. General statements, such as, “Menu 1“ or “Dish of the day 2“, are admittedly not usually objected to by the guest, nevertheless, from the perspective of the service provider, they could be critically assessed. The proper documentation is not just a pre-requisite for a deduction of business expenses but, at the same time, also serves to prevent tampering. The issued receipt constitutes an interface between electronic recording and tax recognition.
Tips as an audit field
Tips likewise continue to be a sensitive area. They are generally deductible as business expenses if they can be verified. Proof can be provided, for example, by a disclosure on the machine-generated receipt or by being shown on the invoice. However, the administrative opinion makes it obvious that tips, insofar as they relate to a business transaction subject to record-keeping obligations, should also be recorded in the cash register system.
Electronic hospitality receipts
A hospitality invoice can be sent both as a structured e-invoice (e.g., in the ZUGFeRD format [an e-invoicing format developed by the Electronic Invoice Forum Germany (FeRD)] or XRechnung) as well as another electronic invoice. If an ERS is used to generate the invoice, then it must also contain the information under Section 6 KassenSichV. Additional details regarding the business occasion or the guests can be added digitally to the visualised document; however, the structured data set must be stored in such a way so that it is maintained unaltered.
Audit relevance and risk potential
In the context of external tax audits, the hospitality receipt fulfils several functions. Besides providing proof of the business occasion, it is used to review appropriateness as well as to check up on parallel situations, for example, by cross-checking against logbooks or diaries. Moreover, formal deficiencies may also result in administrative fines under Section 379 AO.
