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No Company Car for Minijobber in Family-Run Business
It is common to save on taxes and keep money in the family through a spouse providing employment directly to his or her partner. This often happens in the context of a mini-job. This "employment" has to pass the "third party test" - would a non-relative of your spouse give this person the job under the same conditions? When you provide a company car for unrestricted private use without deductibles to your mini-jobbing "better half" will it pass the third-party test? The BFH published its decision of 10.10.2018 (re X R 44-45/17, on February 26, 2019) to answer this question.
In the reported case, the employed plaintiff gave his wife a mini-job as an office manager and courier with a weekly working time of nine hours with a monthly salary of 400 €. As part of the employment contract, he gave her access to the business car for her unrestricted private use. The plaintiff deducted this pecuniary advantage as well as the 400 € salary as deductions from his business income. However, his tax office did not accept this deduction. The tax office took the position that his arrangement did not pass the third-party test.
Employment not Comparable to Third-Party Setups
Upon appeal to the Federal Fiscal Court, the judges held that the plaintiff's setup was not common and comparable to normal employment by an employer not related to the employee. Business relationships between close relatives must be in line with both the essential agreements and the implementation that would be agreed to by third parties in a standard business relationship. The BFH found that the situation in the reported case did not meet those requirements. As a rule, a typical employer would only be willing to allow an employee to use the company's vehicle for private purposes without any restrictions if the calculated costs (including fuel for private use) plus the cash wage are proportionate to the value of the expected work. In the case of low paid work, the employer's risk that providing a company vehicle would no longer be economically viable for him because of an inestimable intensive use by the employee. The plaintiff's argument that his wife was also using the car for business reasons was not significant enough to change the outcome of the case.