BFH: Appearance of private use of company car is sufficient for taxation of the benefit advantage

In its decision dated October 16, 2020 (VI B 13/20), the Federal Fiscal Court (BFH) confirmed the previous principles on the taxation of the private use of a car provided by the employer. The ruling is in line with previous case law: A reliable assertion by the employee that the company car was not used for private journeys is not sufficient to avoid taxation of the benefit. Even the appearance of private use of the business vehicle is sufficient.

The facts of the case

As managing director and sole shareholder of his company, whose legal form is a GmbH, the plaintiff was provided with a company car, which he could also use privately. He got into a dispute with the responsible tax office as to whether the private use of this car was taxable.

The competent tax court dismissed the entrepreneur's complaint, citing procedural reasons. He then lodged an appeal against denial of leave to appeal with the BFH, which has now also been dismissed on procedural grounds.

Was the private benefit of use taxed?

The BFH confirmed in the course of this rejection its established case law, according to which the provision of a company vehicle by the employer to the employee for private use leads to the employee's enrichment and therefore constitutes an inflow of wages. The BFH justifies this by stating that the employee is better off by the amount of money that he would have to spend for the use of his own vehicle. This is saved by the provision of a car by the employer.

According to the BFH, it is not decisive for the taxation of the benefit of use whether the taxpayer can prove that he did not use the vehicle for private purposes. In this particular case, the presentation of reliable facts to prove the non-private use of the vehicle was not sufficient to make it credible that the vehicle was not used for private purposes by the claimant. In the court's overall assessment, this was deemed irrelevant for the taxation of the benefit of use.

Even though the plaintiff stated conclusively that he never used the vehicle for private journeys and even owned another vehicle for this purpose, the BFH ruled that taxation of the benefit of use cannot be ruled out. This can only be waived if the taxpayer would not have been authorized to use the company car for private purposes.

Do these principles also apply to shareholder managing directors?

The BFH ruled that in the specific case in which the plaintiff, as sole shareholder and managing director, was given the car for private use by his GmbH, its fundamental decisions - as for all employees - apply and the above-mentioned principles are to be applied.

According to the BFH, this could be different in the case of a hidden profit distribution (vGA) to the shareholder-managing director. This would be the case if the shareholder-managing director had used the car without a contractual agreement. In this specific case, however, there was no hidden profit distribution.

If the private use of the company vehicle by the managing director were explicitly permitted in his employment contract with the GmbH, the recognition of a hidden profit distribution (vGA) would not be an option. In this case, the use of the company vehicle would be assessed as remuneration in kind, which would result in income from his employment.

The BFH therefore did not uphold the plaintiff's procedural complaint and dismissed it.

Do you have tax-related questions? The law firm Haas und Kollegen from Eschborn near Frankfurt am Main is at your side!