Company car with or without private use

Do employees get an Company car If your child is given a company car, this may often be be used privately. However, employers can also stipulate that company vehicles may only be used for business purposes and thus a Ban on private use of company vehicles decide. Which obligations have to be observed and what are the tax implications? Company car use with or without private use? We provide an overview.

  • If the private use of the company car is regulated in the transfer agreement, the taxation of the non-cash benefit must be taken into account. The 1-percent rule or the logbook are available for this purpose.

  • If private use of the company car is not permitted, this must also be stated in the transfer agreement. Without concrete proof, the tax office may not assume a breach of contract against the private use prohibition.

  • If the private use of the company car is contractually permitted, the tax office may assume that it is also used in this way. This also applies if the driver uses the vehicle exclusively for business purposes. A taxation is therefore obligatory.

  • The commute from the place of residence to the first place of work does not constitute working time and is therefore a private trip. Therefore, these trips must also be taken into account for tax purposes in the case of a company car with a private use permit.

In order to clarify what effects the use of a company car with a ban on private trips can have, let’s first look at all the ways in which company cars can be made available:

1. The "classic": using the company car privately

An employee receives a company car from his employer, which he is also allowed to use for private purposes to the full extent. This was also put in writing like this in the work or service car transfer contract. This results in a non-cash benefit for the employer, which must be taxed under the logbook method or the 1-percent rule.

If the company car can also be used for private purposes, the commute to work is also considered a private trip – as is the case with other employees who drive to work in their private vehicles. Then, in addition to the driver’s logbook or the 1-percent rule, an imputed income must be added to the trips from the place of residence to the first place of work (see 4. Commute to work = private use?).

If company cars may be used privately, the question often arises whether family members can also use it and to what extent. We have summarized for you the most important facts about company car use by third parties.

2. Private use of the company car is prohibited

The second possibility is that the employer provides his employee with a company car, but private trips are not allowed. Then the employer can deduct all vehicle costs and does not have to pay additional income tax. However, the employer must also put the prohibition in writing in the transfer or employment contract. Until a few years ago, the tax office followed what is known as prima facie evidence. In this case, the tax office was able to impute to the employee, without any concrete proof, that he also used the vehicle for private purposes. In the meantime, however, the general suspicion under criminal tax law is no longer valid. Following recent rulings by the German Federal Fiscal Court (Bundesfinanzhof, BFH), it is no longer the employee who must prove that he or she does not use the company car for private purposes – for example, by handing over the keys at the end of his or her shift – but rather the tax office, which must prove that the company car was used despite the prohibition. However, it must not automatically be assumed that there is a breach of contract. Will a Private Use Ban Consequently written, it is assumed without clear proof that the contract has been kept. Thus also no taxation of the vehicle is necessary. However, if there is a demonstrable violation of the ban, the taxation obligation takes effect again.

3. Private trips permitted, but not used

The third case represents in principle the possibility mentioned before – only the other way round. If private journeys are permitted according to the employment contract, but are not made by the employee, until a few years ago he could make a "counter-appearance". that he actually does not use the company car for private purposes – just as he used to have to prove that he did not drive the car in the event of a ban. However, as a result of the above-mentioned rulings, this is no longer permissible on the part of the employee. Just as the tax office may not assume that the company car driver has violated the employment contract in the event of a ban, it may now also not confirm that the driver has not used the company car despite permission. The consequence: If the private use of the company car is expressly permitted in writing, the tax office may assume that the driver actually uses the car privately. This results in a non-cash benefit, which in turn means that the company car is taxed.

4. Commuting = private use?

A frequently asked question in connection with the private use of company vehicles is whether journeys between the place of residence and the workplace (first place of work) are private journeys or business journeys. This often arises when it is included in the employment contract that no private use of the company car is permitted.

Basically, there are three categories of trips, especially when it comes to keeping a valid logbook: the company trip, the commute and the private trip. Company journeys are journeys, "which take place for business reasons" (see Vimcar Blog) – for example a visit to a customer. The commute is the distance between the place of residence and the first place of work. Private trips, on the other hand, are only deducted as "journeys made" denotes, "which cannot be assigned to any business purpose" and thus "a private character" have (ibid.). In addition, there are mixed trips, which are, for example, proportionately both a company trip and a private trip.

Although this categorization distinguishes between commuting to work and private travel, a non-cash benefit is still recognized for tax purposes for both commuting to work and private travel. If the 1 percent rule is chosen, an additional lump sum of 0.03 percent of the list price per distance kilometer and month is usually added as a benefit and is taxable accordingly. For the calculation of the 0.03 percent rule between the place of residence and the first place of work, it is normally assumed that there are 15 days per month on which the driver of the company car makes journeys to the first place of work. In return, however, the company car driver is allowed to deduct commuter trips to work as income-related expenses via the distance allowance.

Instead of the 0.03 percent flat rate, the individual assessment can also be used. This rule is particularly useful if the journey from the place of residence to the place of work is made in the company car on fewer than 15 days per month. This can primarily affect sales representatives, service technicians or employees with a home office arrangement. Then the monetary advantage of each individual trip is assessed at 0.002 percent of the gross list price per distance kilometer.

Both regulations in the comparison – example:

The employee may use a company car for trips from his home to work (distance: 21 km). The gross list price of the vehicle is 40.000 €. In the month of September, he made 10 trips to the first place of work, and spent the remaining work days in his home office.

Monetary benefit per month

Calculation according to 0.03 % flat rate:

40.000 (gross LP) x 0.03% x 21 km (distance) = €252.00

Calculation according to 0.02 % rule:

40.000 (gross LP) x 0.002 % x 10 journeys x 21 km = € 168.00

Under the same circumstances, but with more trips (15x and 16x), the following values result for the individual value calculation:

15 Driving:

40.000 x 0,002 % x 15 journeys x 21 km = 252,00 €

16 trips:

40.000 x 0.002 % x 16 trips x 21 km = € 268.80

The imputed income is the same for 15 journeys per month under both arrangements. From the 16. The 0.03% lump-sum allowance is already worthwhile for a trip.

Regardless of which method the employee and employer decide on, it must be determined for the entire year. A change from the 0.03 percent flat rate to the individual valuation is therefore not permitted during the year. In addition, the employee must record each month on which days he has used the company car to travel to work. However, a simple statement of the days is not sufficient; there must be a written declaration from the employee to this effect, which is usually added to the wage documents. The employee may insist on the use of the individual assessment instead of the flat rate. If the employee provides proper documentation, the employer must use the individual valuation of the commute to work when determining the imputed income.

5. Exclusive use of the private car

Some companies do not provide their employees with a company car, but agree with them on the company use of the private car within the framework of the car allowance model. According to this, business trips are made in your own car. The employee receives a monthly lump sum from the employer for the provision. The owner of the vehicle is, of course, the employee in the case of a private car. The business trips can also be compensated for tax purposes via the commuting allowance. There is no taxation of the non-cash benefit in the model. The administrative effort is shifted from the fleet management to the driver.

We have provided an overview of the Car Allowance model and how it relates to keeper responsibilities and driver license checks and driver instruction in the articles below:

Conclusion: Put regulations in writing

Regardless of which variant you choose, whether for a company car with private use or without, Always keep the regulations in writing in the respective employment contract and/or transfer agreement. If employees are to use the company car exclusively for business purposes, then use clear wording, such as:

On the Internet there are free sample for a Prohibition of private use for company cars. The taxation of the company car used is then also oriented to this. Is the Private use of the company car excluded, but not further defined, whether this also refers to the way to work, the company car may be used for the same. However, this must then be taxed again accordingly.

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