Tax treatment of company cars under actual taxation
August 30, 2013 | 30,00 EUR | answered by Michael Herrmann
Dear Sir or Madam,
Regarding the VAT treatment of vehicles, as a business owner I have the following question:
In 2012, I purchased a car for €12,000 gross. The price was financed by the car dealership as a loan. I did not claim the input tax from the purchase because I was still under the small business regulation in 2012. I deducted the monthly installments as a reduction in profit in my income statement. In 2013, I returned the car. The selling price was €6,000 gross. Since the loan was still at €7,600, I had to pay the difference of €1,600 to the car dealership.
Question:
1. According to the car dealership, I had to issue an invoice to the dealership for €6,000 with VAT shown. Is this correct? Do I now have to pay the VAT of €957.98 shown on the invoice to the tax office, even though no money (except the €1,600) has been exchanged? I am an accrual basis taxpayer and have not received any money!
2. I mainly use the car for business purposes. I treat the leasing installments and depreciation as expenses, and 1% of the list price as income. Is this correct?
Thank you.
Yours sincerely.
Dear questioner,
First of all, thank you for your inquiry, which I would like to answer based on the information provided and in the context of your involvement in an initial consultation. The response is based on the description of the situation. Missing or incorrect information about the actual circumstances can affect the legal outcome.
Regarding your first question: The sale of the predominantly commercially used vehicle is subject to VAT if you are no longer a small business owner in 2013. The treatment of the turnover is correct. It does not matter whether you acquired the vehicle without the option of input tax deduction. An exception would apply if you had used the vehicle to carry out certain tax-exempt transactions. (§ 4 No. 28 UStG)
Your perspective of not having received any money is incorrect. You made a net profit of €5,042.02 from the sale, which was offset against the remaining loan. The offsetting does not exempt you from taxation.
Regarding your second question: According to the facts, there is no leasing agreement, but rather a loan agreement. Therefore, in addition to depreciation, you can only claim the loan interest as an expense. Since the loan disbursement correctly does not constitute business income, the repayment is also not deductible as a business expense.
Also deductible as a business expense is the loss exceeding the depreciation, resulting from the sale proceeds being lower than the book value after regular depreciation (book loss). Ultimately, the difference between the purchase price of €12,000 and the proceeds of €5,042.02 should be recorded as an expense.
I hope that these explanations have provided you with an adequate overview of the situation within the scope of your involvement and this initial consultation.
Yours sincerely,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax advisor
