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Private car use – cost capping

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If an entrepreneur uses a company car

also for private purposes, he has to pay tax on a withdrawal of use to this extent. The amount of the withdrawal is measured

  • if a proper driver’s logbook is kept, according to the proven actual expenses


  • according to a flat-rate amount of 1% per month of the domestic gross list price of the passenger car; the prerequisite here is that the business use of the passenger car is more than 50%.

In the event that the value of use determined according to the 1% rule is higher than the total costs actually incurred (e.g. in the case of passenger cars acquired second-hand or depreciated), the withdrawal of use can be limited to the amount of the total costs according to administrative practice (“cost capping”). The Federal Fiscal Court (Bundesfinanzhof) also rejected a cap of 50% of the total costs beyond this; the court explained that the flat-rate 1% rule can be avoided by keeping a driver’s logbook.

This decision has been criticized, in particular with the argument that if the business use exceeds 50%, the private use share can at most be close to 50%. As a constitutional appeal has been lodged against the ruling of the Federal Fiscal Court, further developments will have to be awaited.

The cost cap could lead to a benefit,

if vehicle costs relating to the entire period of use – in particular special lease payments – are paid in advance in the first year and also have a full impact as operating expenses in the first year. This may occur in the case of profit determination by means of revenue surplus calculation.

Thereafter, in subsequent years, the withdrawal of use would be limited to the (lower) business expense deduction. In this case, however, the tax authorities are of the opinion that a special lease payment should be allocated to the respective periods of use (corresponding to the term of the contract) for the purposes of cost recovery.

(You can find a corresponding example in our information letter 01/2019, which you can subscribe to free of charge on our site).

Without distribution of the special lease payment, the capping in years 02 and 03 would result in usage withdrawals of only EUR 2,000 (corresponding to the ongoing total annual costs); in year 01, the flat-rate usage value of EUR 18,000 would have to be applied (amounts in parentheses). If the special payment is distributed, on the other hand, this results in a withdrawal of use of 17,000 euros for each year (pro rata special payment of 15,000 euros plus 2,000 euros car costs).

(For further comments, information and examples, please refer to our Information Letter 01/2019).

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Neumann & Walczak – tax consulting company GmbH – Robert-Bosch-Strasse 1 – 59439 Holzwickede

Neumann & Walczak Tax Consultants – Partnership –
Robert-Bosch-Strasse 1 – 59439 Holzwickede

Website: www.neumann-walczak.de – E-mail: info@neumann-walczak.de

Phone: (0049) 02301 – 91 291 0 – Fax: (0049) 02301 – 91 291 21