Own Costs for Company Car in Income Tax Return

For simplicity sake, most employers apply the 1% flat rate for supplying a company car to the employee. It often happens that the costs disbursed by the employee are often neither covered nor considered. However, the employee is entitled to claim such costs in his personal income tax return. This article will briefly describe the latest case law from the Federal Fiscal Court.


Pursuant to BFH"s ruling case law, when employers supply their employee with a car that can also be used for private purposes, this is considered as income from gainful employment, pursuant to §19 EStG (BFH judgment of March 20, 2014, re VI R 35/12). The income in kind often raises costs for maintaining the car, e.g. gasoline, repairs, or rent for a garage. These costs are often neglected on the annual personal tax return. If the employer does not want to reimburse the costs, the employee can deduct them from his personal income. The question remains how this is to be done.

Case Law so far

If the value of private usage pursuant to §8 II 2 EStG i.c.w., §6 I no.4 cl. 2 EStG is determined with the 1% rule, until the car costs disbursed by the employee were taxwise irrelevant. In other words, they were neither a deduction nor income (BFH judgments of October 18, 2007, re VI R 96/04 and VI R 57/06).

Partial Change in Case Law

Although tax offices did not want to accept deductions when applying the 1% rule, BFH now decided differently (re judgement of November 30, 2016, re VI R 2/15). When the employee pays costs for the private use of the company car and / or for trips between home and work, these costs now reduce the payment in kind - the usage of the car. However, if these costs exceed the payment in kind, this will not result in negative income nor deductible expenses (BFH judgment of November 30, 2016, re VI R 49/14).

In open cases, the tax offices will accept this income reduction when you show a strong case. All items must be thoroughly explained and stand up to scrutiny.


Employer A gives his employee B a company car which B may also privately use. The list price at the time of bringing the car to the market is 40 k €. No other payment in kind regarding the car exists. The employment contract provides, the employee bears the costs for gasoline, maintenance, and repairs by himself. In the annual payslip, the payment in kind from the car has been computed as 12% of 40 k € = 4,800 €. The total gross income for 2017 was 64,800 €.

Corrections During Assessment

In the annual pay slip 2017, the payment in kind (company car) is included. B gets a document from his employer that the annual worth of private usage amounts to 4,800 €. Then the gross income ought to be "corrected“ which is easily done on a supplementary sheet for the tax return, such as the following:

gross salary per annual wage slip 2017


64,800 EUR

gross payment in kind for company car

4,800 EUR


reduction of payment in kind for disbursed car costs of 5,000 €‚¬, of which 4,800 are deductible

./. 4,800 EUR


net payment in kind for company car



correction of gross salary


./. 4,800 EUR

Assessible gross salary for 2017


60,000 EUR

B can expect a tax reimbursement when he files a return.

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Tagged under: Taxes Private,