Loan agreement for a car
May 23, 2012 | 25,00 EUR | answered by RAin/StBin Henriette Regulla-Schiessl
Dear Sir or Madam,
My client, a sole proprietor, purchased a car for her business through a loan agreement. The purchase agreement and loan agreement are in her name, not in the name of her company. The car is used for business purposes. Can the down payment be booked as a personal contribution and the VAT be claimed back, and can the car be transferred to the fixed assets (with corresponding depreciation)? Or does the car have to be treated as a personal asset in this case, and only the costs associated with it can be booked as business expenses? (With corresponding documentation for tax authorities)
Is the recognition of the business use dependent on the designation of the buyer in the purchase agreement?
Thank you. Sincerely, M. Förster
Dear Questioner,
Thank you for your inquiry, which I will answer in the context of an initial consultation, taking into account your contribution and the rules of this platform.
The response is based on the description of your situation.
Adding, omitting, or changing information, ambiguities, or inaccuracies in the facts provided can alter the tax result.
You need to distinguish between two areas in your question:
the value-added tax aspect and the income tax aspect:
1. Value-Added Tax
I assume that your client is not a small business owner according to §19 UStG.
When issuing contracts, you must consider the definition of an entrepreneur according to § 2 UStG.
An entrepreneur is someone who carries out commercial or professional activities independently. The business includes all commercial or professional activities to generate income....(§ 2 Abs.1S.1 UStG).
Based on this, your client is the entrepreneur, not the company (the company is just the name of the business).
If your client's name is on the contracts, this is fine and does not prevent the purchase from being recorded as part of the VAT business assets.
It is important to immediately document the transactions in the accounts so that the purchase is documented for the business assets!!
To be able to allocate the car to the VAT business assets, the car must be used for at least 10% for business purposes.
2. Income Tax
For the allocation to the income tax business assets, your client's name is sufficient. It is also important to document this in the accounts.
Please note that the car must be used for at least 50% for business purposes, otherwise it is not possible to allocate it to the business assets. To prove this, a mileage log should be kept for 3 months as an example, if not already done, to prevent the application of the 1% rule. The tax office may require proof of at least 50% usage.
If the down payment is taken from the company's assets, the down payment is booked as car to bank (with VAT deduction).
For the remainder, book the car as loan with input tax deduction (attention to discount). In the following years, depreciation must be booked.
I hope this information has helped you.
Sincerely,
Henriette Regulla
Lawyer
Tax advisor
