In a recent BMF letter dated 15 November 2012, the tax authorities clarified the treatment of the private use of company cars where several vehicles are held as business assets, using example cases. In certain situations, the tax authorities allow the private-use taxation (the so-called "1% rule") to be waived. As a matter of principle, the tax authorities state that — as before — the 1% rule must be applied to each vehicle, and they remain strict on this point. In case of doubt, the taxpayer must credibly demonstrate that private use is virtually excluded. However: for vehicles whose private use is virtually excluded, no private use needs to be recognised. This requirement is generally assumed for the following vehicles: workshop vehicles (= vehicles which, due to their objective design and equipment, are typically suitable almost exclusively for the transport of goods) and vehicles made available exclusively to the taxpayer's own employees. Previously, only these two cases were covered. According to the current position, the following are now additionally included: demonstration vehicles of a car dealer, vehicles intended for rental, vehicles of taxpayers who do not carry out their activity at a fixed location, and vehicles of taxpayers who can only provide their services through the use of a motor vehicle. Where such vehicles form part of the business assets, private use need only be recognised for as many vehicles as can be used by the taxpayer and the persons belonging to his private sphere. Previously, it was conceivable that private use had to be recognised for six business vehicles even though only three persons belonged to the group theoretically able to use them. Since the new version provides relief in certain cases, it should be examined whether — for prior years in which the tax assessment is still subject to a full reservation of subsequent review under § 164 AO or the objection period has not yet expired — an amendment in favour of the taxpayer should be applied for.
Frequently asked questions
Frequently asked questions
Does the 1% rule have to be applied to every company car held as business property?
In principle, yes: if several cars are part of the business property, the tax authorities require the 1% rule to be applied to each vehicle. In case of doubt, the taxpayer must credibly demonstrate that private use is virtually excluded. Only then can the recognition of private use be omitted.
For which vehicles does the 1% rule not apply because private use is deemed excluded?
Private use is typically denied for workshop vans that are objectively only suitable for transporting goods, as well as for vehicles made available exclusively to employees. The BMF letter dated 15.11.2012 added demonstration vehicles of car dealers, vehicles intended for rental, and vehicles of taxpayers without a fixed business location or with mandatory vehicle use for service delivery to this group.
How many private-use values must be applied when several cars are part of the business assets?
Private use must only be applied for as many vehicles as can actually be used by the taxpayer and persons belonging to their private sphere. If, for example, six company vehicles are available but only three persons are entitled to use them, the 1% rule applies to only three vehicles. This represents a significant easing compared with the previous practice.
Can the relief provisions for multiple company cars also be applied retroactively to prior years?
Yes, retroactive application is possible if the tax assessment is still subject to review under § 164 AO or the appeal period has not yet expired. In such cases, it should be examined whether an amendment request can be filed in favor of the taxpayer. A review is particularly worthwhile when several business vehicles have previously been taxed under the flat 1% rule.
What are the tax rules for demonstration vehicles of a car dealer?
Since the BMF letter dated 15.11.2012, demonstration vehicles of a car dealer are classified as vehicles for which private use is typically deemed excluded. As a result, no private use needs to be applied under the 1% rule. However, the prerequisite remains that private use is virtually ruled out in practice.