In the case of partnerships, there are various scenarios that have different implications for income tax and sales tax.
- The partner purchases the vehicle, which he uses for both business and personal purposes. No agreement regarding compensation has been reached between the partnership and the partner, so the partner provides the vehicle free of charge.
- The partner purchases the vehicle and leases it to the partnership for a fee. The partnership makes the vehicle available to the partner, who uses it for both business and personal purposes.
- The shareholder may use the company car for personal trips and for commuting between home and work, which results in the accrual of sales tax.
The personal use of a company car is subject to value-added tax. This also applies to partnerships if a partner uses the vehicle for both business and personal trips. The personal use of the car must be reported at its partial value if the car is not used primarily for business purposes. If a general partnership (OHG) or a partner in the OHG uses a car for business purposes more than 50% of the time, the private use of the company car must be determined using the 1% flat-rate method if a proper logbook is not maintained. The classification of a car as business assets remains unchanged.
If the business use of the company car does not exceed 50%, then the general rule applies, under which withdrawals from business assets must be reported at their partial value.
If a partner in a partnership purchases a passenger car that he uses primarily for business purposes, the car is considered part of the partnership’s special business assets. For VAT purposes, the partnership and the partner may be considered two separate business entities. Consequently, the partner has the option of purchasing a car with input tax credit in order to lease it to the partnership subject to sales tax. If the partner also uses this company car—which he has leased to the partnership—for personal trips, the 1% method must be applied under certain conditions. In addition, the personal use is subject to sales tax.
Expenses attributable to personal use may not reduce profit and must therefore be recorded as profit-increasing entries in the account "Use of Assets for Non-Business Purposes 19% VAT (Vehicle Use).".
Practical example:
A partner in a general partnership (OHG) purchased a new car in January. The partner made the purchase personally. The purchase price was €30,000 plus €5,700 in value-added tax (= gross list price of €35,700). The partner leases this vehicle to the OHG for a total of €500 plus €95 in sales tax per month. This vehicle is used exclusively by the partner. He uses the vehicle for both business and personal trips.
The partner does not keep a logbook, so it is not possible to determine the actual extent of personal use. Private use must be determined using the 1% method. This also applies if the partnership provides a leased vehicle to its partner for private use. The general partnership (OHG) must therefore calculate the private use at 1% of the gross list price of €35,700 (rounded down to €100). This amount is subject to sales tax. A deduction of 20% to offset costs without input tax credit is not possible because an exchange of services takes place between the OHG and the partner.
Treatment of Shareholders: The shareholder is considered an entrepreneur within the meaning of the Value-Added Tax Act, regardless of the company. The shareholder must prepare a separate profit and loss statement for himself, in which he accounts for the tax treatment of the passenger car. The shareholder must record the purchase price, the ongoing costs, and any rental income.