According to a recent ruling by the Tax Court of Berlin-Brandenburg, a deduction of car lease instalments as income-related expenses is not possible in cases of salary conversion.
Background: The employer had leased a car for three years and made it available to the employee; the lease instalments were withheld from the employee's salary. The employee sought to claim these costs as income-related expenses in respect of his employment income on his personal income tax return.
The Tax Court of Berlin-Brandenburg took a different view: in its opinion, no income-related expenses were incurred, as the case failed at the level of the very definition. Income-related expenses are "expenses incurred to acquire, secure and maintain income". Since the claimant had waived his salary claim in the amount of the lease instalments, no income-related expenses were present. Only additional costs, such as a pro rata share of fuel costs, are deductible as income-related expenses on a pro rata basis relating to business trips.
Note: An appeal to the BFH was admitted, as the case is of fundamental importance.
Source: FG Berlin-Brandenburg
Frequently asked questions
Frequently asked questions
Are leasing instalments for a company car withheld from salary deductible as work-related expenses?
According to the Tax Court Berlin-Brandenburg, leasing instalments for a provided car withheld by the employer are not deductible as work-related expenses (Werbungskosten) for the employee. The reasoning: by the amount of the leasing instalments, the employee waives their salary claim (salary conversion), meaning there are no own expenses incurred to acquire, secure, or maintain income within the meaning of § 9 EStG.
Which costs of a company car leased through the employer can the employee deduct for tax purposes?
Only additional costs borne by the employee personally are deductible, such as a pro-rata share of fuel expenses attributable to business-related trips. According to current fiscal court case law, the lease installments themselves are not deductible if they are financed via salary conversion.
Why does the Berlin-Brandenburg Tax Court deny the deduction of income-related expenses in cases of salary conversion?
In a salary conversion, the salary component equal to the leasing instalments is never paid out to the employee in the first place. Since the employee waives this portion, there are by definition no expenses incurred from their own assets for the purpose of generating income. However, income-related expenses require the taxpayer's own expenditure.
Is the ruling on car lease payments under salary conversion already final?
No. The Tax Court of Berlin-Brandenburg granted leave to appeal to the BFH due to the matter's fundamental importance. Affected taxpayers should therefore keep comparable cases open and file an objection referencing the pending appeal proceedings until the BFH issues its final decision.