The private use of a company car can be accounted for using either the flat-rate method (also known as the 1% rule) or the logbook method. The logbook method can offer advantages particularly where the vehicle is not used extensively for private purposes or where a precise determination of the private and business shares of use is desired.
However, a logbook is only proper and therefore recognised for tax purposes if all costs can be evidenced individually by supporting documents. A mere estimate of expenses not substantiated by documentary evidence (for example, fuel consumption) precludes the application of the logbook method for assessing private use – as the BFH ruled at the end of 2022. If the logbook method is not recognised, only the potentially less favourable flat-rate calculation remains. Under this method, 1% of the gross list price of the vehicle must be applied per month, and additionally the one-way distance between the home and the first place of work must be taken into account at 0.03% of the gross list price for each kilometre of distance.
Frequently asked questions
Frequently asked questions
What methods are available for taxing the private use of a company car?
The private use of a company car can be taxed either on a flat-rate basis using the 1% rule or via the logbook method. The logbook method can be particularly advantageous when the vehicle is only used privately to a limited extent or when a precise allocation of usage shares is desired.
What requirements must a proper logbook meet?
For a logbook to be recognised for tax purposes, all vehicle costs must be documented individually and supported by receipts. Mere estimates of individual cost items – for example fuel consumption – are not permitted and will lead to rejection of the logbook method.
What did the BFH rule in late 2022 regarding the estimation of costs for logbooks?
In late 2022, the Bundesfinanzhof (BFH) ruled that estimating expenses not substantiated by receipts precludes the application of the logbook method. In such cases, private use must be determined using the flat-rate 1% method.
How is private use calculated under the 1% rule?
Under the flat-rate method, 1% of the vehicle's gross list price is treated as a taxable benefit per month. In addition, for trips between home and the primary place of work, 0.03% of the gross list price per kilometer of distance is applied each month.
What are the consequences for the taxpayer if a logbook is not recognised?
If the tax office does not recognise the logbook, the only remaining option is the flat-rate calculation under the 1% rule. Particularly in cases of low private use, this can be significantly less favourable than the actual cost calculation based on a logbook.