June 21, 2022
If a company vehicle is also used for private purposes or if a company car is also made available to an employee for private purposes, the non-company (private) use of the vehicle must be recorded for VAT purposes as a free transfer of value. This is a corrective to the fact that the input tax deduction from the purchase and the running costs, such as fuel and maintenance, can be claimed in full.
When determining the VAT assessment basis for this free transfer of value, the amounts determined for income tax purposes according to the so-called 1% rule can be used as a basis - in addition to other methods for determining the value. For income tax purposes, the gross list price of electric and hybrid electric vehicles purchased after December 31, 2018 is reduced under certain conditions, in particular by only half or only a quarter. This is an income tax regulation to increase electromobility and reduce CO2 emissions.
In a letter dated February 7, 2022 (file no. III C 2 - S 7300/19/10004 :001), the Federal Ministry of Finance (BMF) clarifies that, due to the generally full input tax deduction from the purchase of an electric or hybrid electric vehicle, adopting the income tax regulations beyond the permissible lump sum according to the so-called 1% rule would lead to a preferential treatment of the entrepreneur from a VAT perspective that does not correspond to the actual circumstances. It should therefore not be adopted.
In the case of private use of company-owned cars by the entrepreneur himself, a deduction of 20% is to be made for expenses not subject to input tax, such as insurance and taxes. The VAT assessment basis of the free transfer of value is thus 80% of the value of the 1% method. This deduction is not made in the case of provision to employees, but in this case the sales tax must still be deducted from the amount determined according to the 1% method (gross value).
Note: In practice, the calculation must be made on a vehicle-by-vehicle basis, taking into account the individual circumstances and the respective vehicle type (combustion engine, hybrid vehicle, purely electric vehicle) and distinguishing between income tax and VAT.
Furthermore, the tax authorities point out that the non-business (private) use of a bicycle that is fully assigned to the business must also be subject to sales tax as a free transfer of value. For reasons of simplification, the entrepreneur can alternatively calculate the assessment basis for the turnover taxation of the non-business use according to the so-called 1% rule for motor vehicles. The same applies to the free provision of a bicycle to staff. The term “bicycle” also includes electric bicycles that are classified as bicycles under traffic law (no obligation to have a license plate, insurance or driver’s license). In this respect, too, the deviating income tax principles (complete exemption from wage tax or waiver of a withdrawal in kind) cannot be used for VAT purposes.