Ask a tax advisor on the topic of Other questions to tax advisors

Special vehicle situation: Business/private property

October 2, 2012 | 30,00 EUR | answered by Wirtschaftsprüfer André Hintz

Dear Sir or Madam,

I need your advice regarding the following situation:

Current situation:

Self-employed since 01/2012, consulting activity, relatively low turnover this year (approx. €8,000).

Vehicle A (MINI, financed, I am the owner and policyholder) is currently used for business purposes almost 100% of the time and has been incorporated into the company, but no logbook is being kept (I was unfortunately not made aware of the possible necessity by my tax advisor).

Vehicle B (BMW Z4, purchased outright, seasonal license plates, owned and policyholder is my mother) is currently used exclusively for private purposes.

Vehicle C (BMW 1 Series, purchased outright, belongs to my girlfriend, owned by her, policyholder is her mother)

Future situation:

Vehicles B and C will be sold, vehicle D (BMW X3, currently owned by my father) is to be bought from him, purchased outright, possibly private financing is also possible if it makes sense, payer is my girlfriend, sales contract could be in my name or in my girlfriend's name

Effectively, if possible, vehicle D should be used by me (for all trips to customers etc. and for all private trips) and vehicle A will be used by the girlfriend for the commute to work and some private trips.

Now to the important questions:

How should I structure the situation if I want to use vehicle D for trips to customers? Can vehicle A remain "in the company" even though vehicle D is used for trips to customers etc.? To what extent should a logbook be kept? Is there a way to avoid the 1% rule for vehicle D (list price €70,000) or does this vehicle necessarily have to be officially considered as being used for business purposes? Can the 100% business use for one of the two vehicles be convincingly justified (for this case, I would probably have to be the owner on both registrations)? Can I then apply this rule to vehicle A, even though it is mainly used by the girlfriend? Does it make sense to not have a vehicle "in the company" as long as little is earned and only low costs are deductible anyway? Can I still deduct trips to customers and fuel costs, etc.? What do I/we need to consider when purchasing vehicle D and how do I possibly take vehicle A "out of the company"? Is it conceivable not to have either vehicle in the company assets?

Thank you in advance for your help!

Wirtschaftsprüfer André Hintz

Dear inquirer,

I would like to answer your question within the scope of an initial consultation and based on your fee commitment, in accordance with the rules of the online portal. My response is based on the situation you have described.

Vehicle A:

If you no longer use the vehicle for commercial purposes, it will be removed from the business assets (once business use falls below 10%). This will be done through withdrawal at fair value. The profit (fair value minus book value) is subject to taxation.

If your friend wishes to use the vehicle, she could purchase it from your company. The sales price should be reasonable and withstand a third-party comparison (fair value).

Vehicle D:

If you use the vehicle for commercial purposes, you can also claim the costs as operating expenses, provided that the invoices are in your name (e.g. insurance, petrol, repairs). This is regardless of whether the car belongs to you. Depreciation can only be claimed if the car belongs to the company.

You could use the sales proceeds from vehicle A to purchase vehicle D. This way, your company can also claim depreciation.

Private trips:

For the evaluation of withdrawals for private trips with the vehicle, you have the option to choose between the flat rate 1% rule and the actual costs, which must be proven through a trip log. Ultimately, you need to calculate which method is more cost-effective for you, depending on how many kilometers you will be driving privately.

The tax office will only accept a 100% commercial use with evidence from your side, so a proper trip log will certainly be necessary.

I hope my explanations have been helpful and remain

Sincerely,

André Hintz
Tax advisor

Steuerberatung@andrehintz.de