There is a possibility how a GmbH shareholder-managing director can also use a company car for private purposes without incurring taxes. It provides for the company car to be leased under a lease agreement. As a shareholder, you buy a suitable vehicle privately and then rent it partly to your own GmbH. The distribution of the use corresponds to real conditions. This is demonstrated by an initial logbook, in which a representative period of about three months serves as the order of magnitude. In this way, a strict separation between operational and private use of the company car takes place. Consequently, neither the 1% rule nor the journey log method need be applied to determine the tax effects of private use. At the same time, the GmbH can set its costs regarding the use of the company car as deductible operating expenses. However, it is important here that the contract conditions also withstand an external comparison.

The company car in its own GmbH is much more than just a means of transport for many shareholder managing directors. Some use it to make a statement of their success, while others use it to disguise their actual economic success. The latter is achieved by using a very inexpensive vehicle in relation to one’s own entrepreneurial success as a company car. If you as a GmbH Managing Director with such a company car with business partners, you subliminally launch a hint for a pricing policy with tight margins. In this way, you hide from business partners, suppliers as well as customers, how high your own margin may actually be. But this behavior also depends heavily on the business contacts. However, in circles where entrepreneurial success is a matter of course, a company car also fulfils a symbolic function. Therefore, an upscale company car in such cases may well have its justification as a status symbol, although status symbols are usually based on an irrational basis.

But the purchase of a company car by a GmbH usually also has tax consequences for the shareholder managing directors. In addition to the operational use for the benefit of the GmbH, many shareholder managing directors also use their company car for private purposes. However, it is obvious that the cost of private use of the company car should not play a role in the recognition of deductible operating expenses, because they are costs of private living.

For this reason, the legislature requires a calculation of the tax consequences for the private use of a company car. For this purpose, § 8 (2) EStG provides in principle two calculation methods to choose from. Either you use a logbook, with which you document the operational and privately arranged trips with the company car. In this way, the costs can be allocated proportionally to the respective use based on the respective kilometres driven. Or you choose a flat-rate calculation, which is based on the gross list price of the company car. The amount of the tax on private use is proportional to the amount of the gross list price. So the more a new company car costs, the higher the flat-rate tax on private use in this case.

Those who use a company car for private purposes relatively rarely are better advised with the so-called journey log method. The blanket method, the so-called 1% rule, is more worthwhile for those who use their company car for private journeys relatively often.

How the taxation of the private use of a company car works exactly and what advantageous special rules there are for electric vehicles, but should be left to other articles. In this article, however, we would like to discuss one of two methods by which the taxation of the private use of a company car can be avoided.

While in the design by means of private leasing ideally a spouse leaves a company car to the entrepreneur, in the model presented here the shareholder-managing director of the GmbH should take action himself. For this purpose, the GmbH shareholder managing director buys a vehicle with private funds that meets the requirements of his own GmbH for a company car. In a next step, the GmbH as a legal entity and its shareholder-managing director agree on the partial transfer of the company car to the GmbH. For example, it could be agreed that the GmbH may use 90 % of the company car, while the remaining 10 % then serve the private use of the shareholder.

In this way you can argue to the financial administration that the private use of the car takes place on the basis of the fact that as a shareholder you are also the economic owner of the vehicle. Therefore, this use is by no means subject to taxation. There is also no reason to apply the journey log method or the 1% rule to private use of the company car.

At the same time, however, the use of the company car by the GmbH for its operational purposes can be booked at 90% as operating costs. This also includes the remuneration that the shareholder can charge to his GmbH for the provision of his car.

By the way, this only works with a GmbH, because it is an independent legal entity independent of its shareholder and therefore strictly separate. A sole proprietor or a partner of a partnership, on the other hand, would rent the company car to himself, which is of course excluded.

In this respect, however, it must be emphasized that the company car should always be handed over to your own GmbH under conditions that are foreign-standard. Otherwise, for example, the excessive remuneration for this could constitute a hidden distribution of profits.

But also in other respects you have to seriously shape and pursue the contractual relationships with your own GmbH. First of all, it is necessary to ensure that the implementation of the contractual arrangements regarding partial use actually corresponds to reality. To do this, you should keep a logbook right at the beginning of the transfer of the company car to the GmbH over a representative period of about three months. In our example, it would therefore be necessary that one could already gather experience with regard to the relationship between private and operational use in order to be able to realistically estimate this in the ratio 90:10.

Of course, there must also be the possibility of a legitimate business relationship between the shareholder in his capacity as a private individual and that of managing representative of the GmbH. Therefore, it must be ensured that the statutes of the GmbH allow the managing director to do business. According to § 181 BGB, such business between the managing director representing the GmbH and himself as a private person is excluded in principle.

Furthermore, the contractual obligations must be consistently implemented. Because it can also depend on whether this design model can be compared with a contract among third parties.

In addition, it is essential to organize the rental of the company car from a private side. In any case, this must not appear to be a commercial act, because this would then lead to regular taxation at the level of the shareholder.

The bottom line is that we have some astonishing tax benefits that, in addition to avoiding the use of the logbook method or 1% rule, may be less thought of at first.

For example, the remuneration that the GmbH shareholder receives from his GmbH for the provision of the company car is tax-free up to an annual amount of EUR 256. This is an exemption limit, which ensures that the tax exemption is eliminated for a higher amount.

But the EUR 256 can only be regarded as a tiny bonus. Because the biggest advantage lies in a completely different context. Thus, the GmbH shareholder can offset the rent received with the wear of the company car, which occurs due to the operational use by the GmbH. Since passenger cars are subject to a period of use of six years in terms of depreciation, the fee for the assignment can be calculated accordingly. For example, the annual co-income corresponds to the pro rata depreciation in the context of the use of the company car by the GmbH plus the small bonus of EUR 256. This way you can also collect the rental income tax-free.

The depreciation that the GmbH shareholder can make on the company car also provides another tax advantage. Because the sale of the previously rented company car takes place at the shareholder on a private level and thus tax-free. This is because a car as an object of daily use is not subject to any speculative period (§ 23 (1) no. 2 sentence 2 EStG). On the other hand, when selling a company car, the GmbH would have to tax the positive difference between the sales proceeds and the remaining book value, i.e. the resulting book profit. And since the impairment due to the six-year depreciation of a car takes place linearly, the impairment on the market follows completely different rules, there can be considerable differences. As a rule, a GmbH that writes off a company car for six years would always realize a book profit. After all, a six-year-old car on the used car market always brings in more than the accounting residual value of EUR 1.

As nice as the alternative described here to taxing the private use of a company car may seem, one should also pay attention to critical points. The most important thing here is that one has to expect that the financial administration could refuse recognition of this arrangement in individual cases, for example in the context of an audit.

On the one hand, it may be that the design model is generally regarded as an abuse of design according to § 42 AO. However, there is an argument against the fact that there are also extra-tax reasons that satisfy this design model. Our model also offers the advantage that the GmbH can retain a higher liquidity than if it buys the company car itself.

On the other hand, there may be doubts about the distribution of use. Therefore, one should also be able to provide proof of a realistic assessment. The journey log shall be kept for a representative period. Therefore, it should be conducted properly during this time to ensure that this data is meaningful and trustworthy.