(2021) Private vehicle use: (4) Cost ceiling with the flat-rate method

When applying the 1% flat-rate method, it may happen that the private usage value is higher than the actual vehicle costs. This is particularly possible if the vehicle has already been depreciated and therefore no depreciation can be applied, if it is a used vehicle, or if the vehicle is leased. In this case, cost capping may be considered (in line 19).

• Actual costs include ongoing operating costs, depreciation, and interest on loans.
• The total actual costs are first reduced by the travel allowance for journeys between home and work, as this deduction is generally available to you.
• The remaining amount of the total costs is then compared with the flat-rate usage value and applied as cost capping.

Example:
For a company car with a list price of 40.000 Euro (including VAT), total costs of 6.000 Euro were incurred. The car was used on 200 days for journeys between home and work (distance 20 km).

1. Private usage share:     1 % x 40.000 Euro x 12 To be taxed as private withdrawal	4.800 Euro
2. Usage value for journeys home-work:     0.03 % x 40.000 Euro x 20 km x 12     Non-deductible business expenses	+ 2.880 Euro
Flat-rate usage value according to the flat-rate method     Actual total costs      - reduced by travel allowance for journeys home-work:      200 days x 30 km x 0.30 Euro =	= 7.680 Euro 6.000 Euro ./. 1.200 Euro
Maximum amount of flat-rate values	= 4.800 Euro

 

VAT: In the case of cost capping - if the private usage value according to the flat-rate method is limited to the total costs - you do not need to use the total costs as the basis for VAT, but proceed as follows:

• First, deduct the costs that were not subject to input tax from the total costs. These are operating costs such as car insurance, car tax, broadcasting fee, garage rent, ADAC membership fee, and costs incurred abroad. Interest on loans is also included. Depreciation is also included if no input tax deduction was possible on the purchase costs, e.g. when buying from a private individual or transferring from private assets. What remains are the total costs with input tax.
• Then determine the private usage share. You may estimate this based on suitable documents. If such documents are not available, you must set the private usage share at a minimum of 50%. Journeys between home and work are not considered private but business-related.
• Finally, apply the total costs with input tax at the private usage share as the basis for VAT, and calculate 19% VAT on this.

 

Example:

The private usage value according to the flat-rate method is The actual total costs are Journeys between home-work, assumed	3.600 Euro 3.000 Euro ./. 1.100 Euro
Private usage value after cost capping Deduction of costs not subject to input tax	= 1.900 Euro ./. 600 Euro	1.900,00 Euro
Total costs with input tax Private usage share, estimated	= 1.300 Euro x 40%
Basis for VAT 19 % of the basis	= 520 Euro	+ 98,80 Euro
To be taxed as business income		= 1.998,80 Euro