Licensed Driver Status: Things the Tax Authorities Overlook
Are you utilizing your company vehicle for personal errands, and believes that employing an Excel spreadsheet as a logbook imparts a sense of professionalism and convenience? Think twice.
If you're utilizing your company vehicle for private purposes, you're required to declare this tax benefit in your income tax declaration. As per the "German Crafts Newspaper" (DHZ), there are two alternatives available: you can maintain a logbook, which is suggested if you only utilize the company vehicle for personal use to a minimal extent. Alternatively, you can make use of the so-called one-percent rule. However, this could lead to a substantially higher private share in instances of minimal private use.
In order for the tax office to acknowledge the records within the logbook, certain factors need to be taken into consideration:
- All trips should be documented, comprising the route, distance traveled, and purpose of the trip.
- The logbook should be consistently updated and devoid of gaps.
- Any subsequent changes should be clearly discernible.
Prevention of inconvenience
To prevent annoyance, you should evade typical mistakes when maintaining a logbook, as the tax office might regard it as invalid and disregard it. According to DHZ, you should avoid the following mistakes:
- Entering all trips in an Excel spreadsheet, as the records can be modified retroactively without leaving a trace.
- Documenting trips on loose sheets of paper, as individual pages can be altered or substituted retroactively. It's preferable to use a bound book.
- Deferring entries due to lack of time to purchase the book or making entries later due to the logbook being excessively soiled. In both scenarios, the logbook may become invalid as a consequence of not documenting the entries promptly.
Establishing legal security
Suggestion: You could have your logbook assessed for legal security. The tax office offers this service for free, as reported by DHZ, citing a ruling by the Hessian Finance Court (Az.: 3 K 1219/21).
In this dispute, a business owner requested the tax office to review their digital logbook with records - within the scope of the so-called "call-out information" (according to Section 42e EStG). Although the case was decided against the business owner, it demonstrates that you can have the tax office examine your logbook early on to establish whether it's being kept appropriately. Alternatively, you can consult your tax advisor, advises DHZ.
If you choose to maintain a physical logbook for your company vehicle, it's crucial to avoid using an Excel spreadsheet to document your trips, as modifications can be made without leaving a trace. Instead, consider using a bound book to ensure the integrity of your records.
In case you decide to utilize the one-percent rule instead of maintaining a logbook, be aware that it could result in a higher private share of vehicle usage, especially if your personal use is minimal.
