Input tax credit for luxury company cars

Input tax deduction is an important mechanism that helps businesses reduce their sales tax burden and ensures that they only have to remit the difference between their own sales tax and the input tax they have paid to the tax authorities.

But what about input tax deduction for luxury company cars? In the business world, this question repeatedly raises complex legal issues. The interpretation of intended use and tax regulations leads to differing decisions, as two recent rulings demonstrate.

Inconsistent Interpretation: Hamburg Fiscal Court and Federal Fiscal Court

The most recent decisions by the Hamburg Fiscal Court (FG Hamburg) and the Federal Fiscal Court (BFH) regarding input tax deduction for luxury company cars reflect an inconsistent interpretation of tax laws. One interesting case involves an entrepreneur who purchased a Ferrari California and successfully claimed the input tax deduction. The rationale was that the vehicle was used for business purposes in the renewable energy sector.

In contrast, another entrepreneur who purchased a Lamborghini Aventador was denied the input tax deduction. In this case, the vehicle was considered an unreasonable representation expense that primarily served private interests. These differing rulings demonstrate how the tax law interpretation of the use of luxury company cars can vary, even when they are used for business purposes.

BFH Rulings on Luxury Company Cars as Investments

The Federal Fiscal Court (BFH) has also ruled on luxury company cars as investments. In two cases, input tax deduction was denied when entrepreneurs stored luxury company cars without registration in a warehouse. The BFH argued that the mere storage of such vehicles does not constitute an economic activity that directly, permanently, and necessarily expands the taxable main activity. However, it remains unclear what criteria the BFH uses to assess such an expansion.

Conclusion

In summary, it is evident that the tax assessment of input tax deductions for luxury company cars depends heavily on individual circumstances. The courts’ interpretation of the laws is not unambiguous and leaves room for interpretation. The exact use, intended purpose, and proof of business relevance play a decisive role. Tax law therefore requires a detailed examination of each individual case.

The issue of input tax deduction for luxury company cars remains complex and underscores the need to establish a clear and uniform interpretation of the laws in order to provide companies with greater certainty regarding the tax treatment of such investments.

With our offices in Düsseldorf and Oberhausen, we are available to assist you in person. Our team of qualified tax professionals supports you with all tax-related questions and concerns. Contact us to schedule a consultation.