(2022)
Private vehicle use: (4) Cost ceiling with the flat-rate method
When applying the 1% flat-rate method, it may occur that the private usage value is higher than the actual vehicle costs. This is particularly possible if the vehicle has already been depreciated and therefore no depreciation can be applied, if it is a used vehicle, or if the vehicle is leased. In this case, cost capping may be considered (in line 19).
- Actual costs include ongoing operating costs, depreciation, and interest on debt.
- The total actual costs are first reduced by the travel allowance for journeys between home and work, as this deduction is generally available to you.
- The remaining amount of the total costs is then compared with the flat-rate usage value and applied as cost capping.
Example:
For a company car with a list price of 40.000 Euro (including VAT), total costs of 6.000 Euro were incurred. The car was used on 200 days for journeys between home and work (distance 20 km).
1. Private usage share:
1% x 40.000 Euro x 12 To be taxed as private withdrawal |
4.800 Euro
|
2. Usage value for journeys home-work:
0.03% x 40.000 Euro x 20 km x 12
Non-deductible business expenses |
+ 2.880 Euro |
Flat-rate usage value according to the flat-rate method
Actual total costs
- reduced by travel allowance for journeys home-work:
200 days x 30 km x 0.30 Euro = |
= 7.680 Euro
6.000 Euro
./. 1.200 Euro
|
|
Maximum amount of flat-rate values
|
= 4.800 Euro |
VAT: In the case of cost capping - if the private usage value according to the flat-rate method is limited to the total costs - you do not need to use the total costs as the basis for VAT, but proceed as follows:
- First, deduct the costs that were not subject to input tax from the total costs. These are operating costs such as car insurance, car tax, broadcasting fee, garage rent, ADAC membership fee, and costs incurred abroad. Interest on debt is also included. Depreciation is also included if no input tax deduction was possible on the purchase costs, e.g. when buying from a private individual or transferring from private assets. What remains are the total costs with input tax.
- Then determine the private usage share. You may estimate this based on suitable documents. If such documents are not available, you must set the private usage share at a minimum of 50%. Journeys between home and work are not part of the private share but the business share.
- Finally, apply the total costs with input tax at the private usage share as the basis for VAT, and calculate 19% VAT on this.
Example:
The private usage value according to the flat-rate method is
The actual total costs are
Journeys between home-work, assumed |
3.600 Euro
3.000 Euro
./. 1.100 Euro |
|
Private usage value after cost capping
Deduction of costs not subject to input tax |
= 1.900 Euro
./. 600 Euro |
1.900,00 Euro |
Total costs with input tax
Private usage share, estimated |
= 1.300 Euro x 40% |
|
Basis for VAT
19% of the basis |
= 520 Euro |
+ 98,80 Euro |
|
To be taxed as business income
|
|
= 1.998,80 Euro |
Note: Some cash-basis taxpayers previously used the following tax model: They leased their company car, made a high special leasing payment in the first year, fully deducted it as a business expense, and then determined the private share using the 1% rule in the following years. Due to the so-called cost capping, this often resulted in only a very small private share for car use.
After the tax authorities and some tax courts had already rejected the model, the Federal Fiscal Court has now also refused to recognise the tax model (BFH rulings of 17.5.2022, VIII R 11/20, VIII R 21/20, VIII R 26/20). The following example illustrates the problem:
A freelancer leases a car with a gross list price of 120.000 Euro, starting in December 2015 (term 36 months). In the first year, a special payment of 30.000 Euro plus VAT is agreed. The monthly leasing rates are then only 350 Euro plus VAT. The freelancer calculates his profit using the cash method and fully deducts the special leasing payment in 2015 as a business expense. In 2016 and 2017, he chooses the 1% rule and would therefore have to tax 1% of the gross list price per month (annually 14.400 Euro) as a private withdrawal. However, he applies the cost capping and only taxes a private share of, for example, 6.000 Euro per year. This arrangement was regularly accepted by many tax offices in the past. However, at some point, the tax authorities found it "too much", as more and more self-employed individuals were exploiting it for tax purposes. As a result, the tax authorities decided not to accept the model further (OFD Karlsruhe, VASt Aktuell 6/2018 of 1.8.2018; decree of the Hamburg tax authority of 8.11.2018, S 2177- 2018/001 - 52).
For the example mentioned, this means: The special leasing payment must be spread over the term for the cost capping check. Therefore, in 2015, only 1/36 of the special leasing payment is to be included for cost capping purposes. In 2016, 12/36, in 2017 also 12/36, and in 2018 11/36 of the special leasing payment are to be applied. The cost capping in 2016 would therefore not be 6.000 Euro, but 6.000 Euro + 10.000 Euro = 16.000 Euro, so 14.400 Euro would be taxed as a private share. To avoid misunderstandings: The special leasing payment itself usually remains deductible as a business expense when paid; this is only about cost capping.
The Federal Fiscal Court considers the tax authorities' view to be correct. The cost capping regulation may be interpreted in the sense of the tax authorities. Any taxpayer who uses a company car for private purposes can also avoid the 1% rule by keeping a logbook.
