Asset Management GmbH and Company Car

Deduct GmbH company car

Accounting for a company car in the form of flat-rate accounting is the most common method. This method is not relevant for the managing director of a GmbH who wants to finance a company car from cash flow. However, the principle is briefly explained for the sake of completeness:

Travel expenses are charged kilometer by kilometer if the company car is used for travel. For cars, the flat rate is 30 cents per kilometer driven. Kilometers driven can be claimed for tax purposes, but only under certain conditions. The total amount can be deducted from the total taxable income as income-related expenses. It does not involve a great deal of effort, but is also not very profitable.

The car is paid for by the cash flow generated by the company and is therefore a benefit in kind instead of a salary. The company car is part of the remuneration. The whole thing must be listed in the payroll and recorded in the contract. There is often a desire to use the vehicle for personal purposes as well. What then applies to the GmbH company car for private use?

The employer, in this case the GmbH, bears all the costs of the vehicle. The beneficiary only has to pay tax on the non-cash benefit that arises from the provision of a company car. The so-called “private usage share” can be determined as follows:

1% rule

Under this rule, a flat rate of 1% of the gross list price of the vehicle is added to income and taxed for private journeys. In addition, 0.03% of the gross domestic list price of the car must be added to the gross salary for each kilometer of distance between work and home.

Example: If the distance between home and work is 10 kilometers, an additional 10 x 0.03 = 0.3% of the gross list price must be taxed in addition to the 1% of the gross list price.

Driver’s logbook

Every single journey and all costs incurred must be documented in the logbook. This is used to determine the private benefit, which is then taxed.

Which of the two methods pays off more depends on various aspects, such as the annual mileage, the proportion of private use and the vehicle model. In general, however, it can be said that the 1% rule is particularly worthwhile from a tax perspective if the company vehicle is often used privately and then for long distances. It is also advantageous if the distance between work and home is as short as possible.

If the vehicle has a very high list price when it is first registered, it may still make more sense to keep a logbook than the 1% rule. The logbook is worthwhile if the main focus is on business use and the car is used very little privately. Private use can only be proven through precise documentation.

Tip: If you want to optimize your tax situation, you should keep a logbook despite applying the 1% rule so that you can choose the more profitable option at the end of the year.

However, the private use of a company car by the managing director of a GmbH also repeatedly leads to discrepancies during company or wage tax audits. It is important to ensure that the tax office cannot assume a hidden profit distribution. In the event of a hidden profit distribution, there is no taxation according to the driver’s logbook or with the 1% advantage; instead, there is a risk of an additional wage tax payment.

Private use must be clearly and unambiguously contractually regulated with the GmbH. If the car really is used exclusively for business purposes, any costs relating to the vehicle must be treated as business expenses. The GmbH can then deduct the entire costs, depending on the type of purchase and use.

Any exclusively business use of the vehicle must be proven to the tax office with a logbook. Owning a second car for private purposes is also a prerequisite. Otherwise, private use of the company car will be assumed. Even if the vehicle is used exclusively for business purposes, this should be specified in the form of a ban on private use.

Rental of the company car

If the company car is also used privately, the private use portion must be taxed. This is a non-cash benefit in the form of a benefit in kind; this is subject to tax.

The private use of a company car certainly has its advantages. The total acquisition costs as well as the operating expenses have a profit-reducing effect on the GmbH and thus generate tax advantages.

For car models with a high list price, however, taxing the private use portion using the 1% rule leads to high wage tax and social security contributions.

Leasing the company car to the GmbH can help to further optimize the tax aspects. The gross list price, which worsens the calculation under the 1% rule, does not have to be taken into account in this construct. The vehicle is assigned to private assets, not to the assets of the GmbH. It can be used privately without restrictions.

The car is available to the GmbH as a company car for a rental or leasing fee. The private individual rents the private vehicle to their own GmbH. The resulting income from the rental must be taken into account for personal income tax purposes. At the same time, however, the acquisition costs of the car can be deducted.

The deal also works from the perspective of the GmbH, as the rental fees are immediately and fully tax-deductible as a business expense.

A clear distinction between private and business use must be made at the outset so that the tax authorities can use this information to determine what percentage of the car can be written off. The more the vehicle is used for business purposes compared to private use, the higher the depreciation.

By deducting the acquisition costs within the usual 6-year depreciation period, the tax office should be able to write off around half of the purchase price. If the car is now sold again, ideally as a tax-free private sale, it is even possible to make a profit – depending on the loss in value of the car. If the sale were made by the GmbH, this would have to be taxed.

This variant combines the advantages of a company car for the asset-managing company with those for the private individual and enables the desired dream car with as few compromises as possible.

Buy or lease a GmbH company car?

Buying incurs high costs at the beginning, but unlike leasing, there are no additional payments in the event of damage on return. The significant advantage of leasing is the lower initial cost factor. The vehicle is paid off in monthly installments. At the end of the leasing term, the vehicle is returned to the contractual partner.

With regard to tax depreciation, it should be noted that the vehicle cannot be written off in full in the year of purchase. It is usually depreciated over a period of six years. Although there are small tax advantages over the years, there are no major tax savings in the year of purchase. The purchase also has a negative impact on your company’s capital.

With leasing, on the other hand, all fees can be deducted if the vehicle is used at least 90% for business purposes. The leasing installments can also be deducted if the vehicle is increasingly used privately. However, the majority of the use must still be for business purposes. The leasing installment can be deducted monthly.

Conclusion

If you are looking to purchase a company car, you should consider doing so in the form of leasing in order to realize the best possible tax savings. In an asset-managing GmbH with real estate, there are numerous ways to use a company car for business purposes. If the properties are in different locations, it is possible to combine the obligatory (on-site appointments at your properties) and the nice (such as a vacation near one of the properties or on the way there). Those with a little skill can use many of the existing rules to their advantage here.