Tax tip 12: Private use of company cars: This applies to holiday trips

From a tax perspective, the use of a company car on holiday is generally unproblematic, as the resulting non-cash benefit is covered by the 1 per cent rule that is typically applied. According to this rule, employees must pay tax on one per cent of the gross list price of the company car per month. In addition, 0.03 per cent of the gross list price per kilometre of the distance between home and work is added. Although the company car is not used for journeys between home and the first place of work during the holiday, the benefit in money's worth may not be reduced for these journeys in accordance with the 0.03 per cent rule. This applies even if the holiday is longer and covers full calendar months.

If the employer's fuel card does not work when abroad, it is possible for tax purposes to have the refuelling costs subsequently reimbursed by the employer as a reimbursement of expenses. As the costs for the fuel are covered by the 1 per cent rule, this does not result in any additional non-cash benefit for the employee. If the fuel costs are not reimbursed by the employer, they can be offset as an additional payment by the employee against the non-cash benefit in accordance with the 1 per cent rule. This was ruled in favour of taxpayers by the Federal Fiscal Court in its judgement of 30 November 2016 (VI R 2/15). The tax authorities follow this case law, but require that the assumption of costs is agreed in the employment contract or is based on an agreement under labour law.

However, this does not apply to other costs of the holiday trip such as ferry costs, vignettes, tolls, parking fees or fines and penalties. These cannot be reimbursed tax-free by the employer. It is also not possible to offset these costs against the non-cash benefit of using a company car. If there is an accident with the company car while on holiday, further expenses such as towing and repair costs may be incurred. These are exceptional costs for tax purposes, which are not covered by the 1 per cent rule and must therefore be treated separately.

The tax authorities have provided the following simplification rule for this in the income tax guidelines. If the accident costs (possibly after reimbursement by the insurance company) do not exceed 1000 euros plus VAT, there is no objection if these are included in the total costs as repair costs. This regulation means that accident costs borne by the employer up to 1000 euros plus VAT per claim are not to be recognised as a separate non-cash benefit.

If the company car can no longer be used as a result of the accident and a hire car is therefore used on site, these are not accident costs for tax purposes, but a vehicle transfer. The tax authorities then assume a change of vehicle. If the hire car is predominantly used within a calendar month, the calculation of the non-cash benefit must be based on the gross list price of the hire car in accordance with the 1 per cent rule.