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Knowledge for owners of limited liability companies (GmbH): What you have to watch out for when considering cars

You have just founded a GmbH and are wondering whether you should transfer your private car to your GmbH? Are there any tax benefits you can claim here or is this a “tax trap” that you need to avoid?

My short answer: When transferring your own car to the GmbH, the disadvantages usually outweigh the advantages.

Let me explain why this is the case in this post.

I will also explain how you can optimize and really save money and why, from a tax perspective, your next company car should be an electric car.

This article was updated on 29 July 2021.

Transferring a private car to a GmbH: Why should you avoid doing this?

Contributing your private assets to the GmbH is taxed at around 50 %. You have to pay corporate income tax, trade tax, final withholding tax and the solidarity surcharge.

Because of this high taxation, you should only ever contribute private assets to your GmbH if you really benefit from them in the long term.

With more than 15 years’ experience as a tax consultant I can tell you: This is never the case with cars (but there is one single exception).

Incorporating a non-cash GmbH: In this exceptional situation, it may make sense to contribute assets

With a so-called non-cash incorporation, you can form a GmbH without having to pay in the required share capital of EUR 25,000 in cash.

Instead, you can contribute an asset (for example, your car) to the GmbH.

But beware: If, in the event of insolvency, it turns out that your car does not correspond to the value stated in the balance sheet, you are liable with your private assets for the difference between the valuation and the actual selling price.

In other words: If your car is valued at EUR 25,000 in the balance sheet and the administrator can only sell it for EUR 15,000 in the course of insolvency proceedings, you are personally liable for the difference of EUR 10,000.

Whether you use your car as an asset for incorporating a GmbH therefore depends on your own willingness to take risks.

In a separate blog post, I have summarized the situations where a non-cash incorporation may make sense: https://www.steuerberatung-breit.de/en/knowledge-for-entrepreneurs-what-is-a-gmbh-sachgruendung-risk-or-opportunity/

Tax advantages when buying a company car: What is the investment allowance?

The investment allowance allows you to depreciate 60% of your company car before you buy it:

  • In the so-called planning phase (a maximum of 3 years before the purchase), you can depreciate 40% of the expected investment amount.
  • If you buy the car within these 3 years, you can immediately depreciate another 20% of the purchase price.

However, in order to actually be able to use the investment allowance, you must abide by 2 rules:

  • You must use the car at least 90% for business purposes
  • The car must remain in your company for at least one year

In addition, your company must meet one of the following conditions:

  • Your equity must not exceed EUR 235,000 (when drawing up a balance sheet).
  • Your profit must not be more than EUR 100,000 (in case you use the cash method of accounting).

Private use of a company car: Do you have to keep a logbook?

As a managing director of a GmbH, you do not have to keep a logbook in order to be able to use the investment allowance. Your company car is always considered a 100% business asset.

The same applies to your employees’ company cars. Here, too, you can always claim the investment allowance amount without having to keep a logbook.

You only have to use a logbook to prove that you use the car at least 90% for business purposes if you are a sole proprietor or a partner in a partnership (KG, oHG or GbR).

These 3 tax advantages say your next company car should be an electric car

1st advantage: You receive a purchase premium of up to EUR 9,000 per electric car

When you buy an electric car, you receive an environmental bonus of up to EUR 6,000 and an innovation premium of up to EUR 3,000.

You can easily apply online.

Note: You also receive both payments if you lease the vehicle.

2nd advantage: You pay no road tax for up to 10 years

Road tax is calculated on the basis of the engine capacity and the emission values of the car. For the three most popular (combustion) company cars in Germany, you can expect the following annual costs:

  • VW Passat:EUR 100 to 300 (depending on the model)
  • VW Golf:EUR 100 to 220 (depending on the model)
  • Audi A4:EUR 90 to 300 (depending on the model)

These costs are completely eliminated for an electric car.

3rd advantage: Your employees pay 75% less tax if they use the car privately

If your employees also use the company car privately, 1% of the purchase price of a car with a combustion engine is added to their salary each month and must therefore be taxed.

With an electric car, on the other hand, only 0.25% of the purchase price is added to the salary and taxed.

In addition to these tax advantages, you also benefit from all the other advantages of modern electric cars, such as low running costs.

Conclusion: There is a lot of tax-saving potential for GmbH owners when it comes to cars

Contributing your private car to the GmbH is usually not a good idea from a tax point of view. You have to pay tax on this contribution at a rate of approx. 50%.

There are much better options for optimizing tax:

  • Buy a company car via the GmbH and make the most of the investment allowance
  • Buy an electric car and secure up to EUR 9,000 purchase premium and other tax advantages

Do you have any further questions about company cars after reading this article? Or would you like to know the exact sum of how you can benefit from the investment allowance for your next company car purchase?

I will be happy to answer all these questions in a personal meeting at my tax office.

You can reach me at any time via telephone (+49 40 44 33 11), e-mail (anfrage@steuerberatung-breit.de) or my contact form (click here!).

Kind regards,

Thomas Breit

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