Car tax deductible? These are the sticking points!
If you’re thinking about deducting your car from tax, there are a few important things you should keep in mind. We will explain the most important facts in more detail below.
1. business use is decisive
To be able to deduct your car from tax, it must be used predominantly or exclusively for business purposes. This means that you must provide clear evidence of your journeys. Carefully document when and where you drove to carry out business activities.
2. a correct logbook is essential
A well-managed and properly kept logbook is of central importance. It must contain all relevant information, including the date, time, place and purpose of the journeys as well as the mileage at the beginning and end of each journey. Illegible or incomplete logbooks are often not accepted by the tax office.
3. reasonableness of the costs
Make sure that the cost of your vehicle is considered reasonable. Excessively expensive luxury cars could cause difficulties with tax deductions. As a rule, reasonable costs that are related to your business activity are more likely to be recognized. What is considered reasonable? You can expect a vehicle to be recognized up to a price of 100,000 euros.
However, whether the tax office accepts your company car as appropriate depends on other criteria. Basically, the more expensive the vehicle, the larger and higher turnover your company should be. More profit therefore justifies a more expensive vehicle.
It also depends on the industry when it comes to representative purposes. In the advertising industry, you have a good chance of selling a luxury vehicle such as a Porsche or Ferrari.
This would be more complicated in a simple craft business. However, if you produce very exclusive and expensive items in your trade, the chance of being able to deduct a luxury vehicle without a major dispute with the tax office increases.
4. appeal against the rejection
If the tax office rejects your tax deduction, you have the right to lodge an appeal. This is an important measure to protect your interests. Especially if ongoing court proceedings can clarify similar cases.
5. observe court proceedings
There are always court cases on this subject. Why is that? Earlier in the blog post, we reported on what is known as appropriateness. This has not yet been clearly defined in the law. As there is no fixed upper limit for the deduction of a vehicle, disputes and legal proceedings arise time and again. Basically, it can be said that decisions on appropriateness are sometimes made arbitrarily. After all, what is considered reasonable is always in the eye of the beholder.
Current court cases, such as the one in the following YouTube video (Deduct your car from tax: Too expensive for the tax office? New judgment! ) mentioned before the Munich Fiscal Court could affect the tax treatment of vehicle deductions. Therefore, keep up to date with relevant court decisions, as they may have an impact on your tax situation. You can of course also follow our YouTube channel, as we will be reporting on this topic as soon as there is any news.
6. conclusion
If you want to deduct your car from tax, you should take the above aspects into account.
If the tax office rejects the costs for your car, you should appeal against this. This is because your choice of vehicle is fundamentally subject to entrepreneurial freedom. This is already regulated in the Basic Law.
You can find the relevant PepperPapers legal document here: The tax office rejects the costs for your car
If you have any further questions, please contact us for advice. You can book an initial consultation here: Do you need an individual initial consultation?
