In its ruling of 20 March 2014 (Az. VI R 35/12), the Bundesfinanzhof (BFH, German Federal Fiscal Court) held that a logbook is only to be recognised if it has been kept for the entire assessment period. The BFH thereby confirmed the case law of the Münster Tax Court (judgment of 27 April 2012, Az. 4 K 3589/09 E).
The logbook Keeping a logbook generally serves the purpose of determining, for tax purposes, the share of private use in the total vehicle expenses and total mileage. In the underlying case, the plaintiff had been provided with a vehicle by his employer that was also available for private use. From 1 May 2008 onwards, he kept a logbook for this purpose that satisfied all substantive requirements of a logbook. The tax office took the view that the benefit-in-kind had to be calculated using the 1% rule, since the logbook had not been kept for the entire assessment period throughout the year.
The BFH's decision on the logbook In its ruling, the BFH once again addresses the requirements for such a logbook, namely that it must be complete and accurate in order to determine the taxable private share. The BFH further explains that the taxpayer may only choose the logbook method instead of the 1% rule if the logbook has been kept for the entire assessment period. This is justified, among other things, by the fact that a mid-year change of methods would be inconsistent with the principles of simplification and standardisation underlying the law and would create an increased risk of manipulation.
Conclusion Ultimately, it must be noted that in the case above it is already remarkable that the taxpayer managed to keep a logbook at all that meets the substantive requirements of the case law. In our experience, this is often an insurmountable hurdle. In any event, the taxpayer is further obliged to decide from the outset which of the two methods (1% rule or logbook) he wishes to use.
Frequently asked questions
Frequently asked questions
Must a logbook be kept for the entire calendar year?
Yes. According to the BFH ruling of 20 March 2014 (Az. VI R 35/12), a logbook is only recognised for tax purposes if it is kept without gaps for the entire assessment period. A logbook started only during the year is not sufficient to apply the logbook method instead of the 1% rule.
Is a mid-year switch between the 1% rule and the logbook method permitted?
No. The BFH rejects a mid-year switch between the 1% rule and the logbook method. This is justified by the legislative principle of simplification and standardization, as well as the increased risk of manipulation when changing methods within a single assessment period.
What are the consequences of keeping a logbook for only part of the year when taxing a company car?
If the logbook is not maintained for the entire calendar year, the non-cash benefit from the private use of the company car must be determined using the 1% rule. The trips actually recorded are then disregarded for tax purposes.
What content requirements must a proper logbook fulfill?
A logbook must be kept completely, continuously, and as a self-contained record so that the taxable private-use portion can be reliably determined. All business and private trips must be documented promptly and in a tamper-proof manner, including the date, odometer reading, destination, purpose, and business partners visited.
When must the taxpayer decide between the 1% rule and a logbook?
The choice between the two methods must be determined at the start of the assessment period. Anyone wishing to use the logbook method must keep the logbook continuously from 1 January (or from the start of vehicle use) through to the end of the year.