Tax Advisors Explain: Logbooks for Business Owners
Business owners who have the privilege of using a company car often like to use it for personal purposes as well. That’s perfectly fine, of course. However, if you do use the car for personal purposes, the tax office will require proof of the business and personal portions of the mileage driven. Keeping a logbook can be helpful here. In this article, our tax advisors from Düsseldorf and Oberhausen have summarized the most important information on logbooks for business owners.
How can entrepreneurs claim vehicle expenses for tax purposes?
For business owners, there are two different ways to claim the costs of a company car for tax purposes. A distinction is made between the 1% rule and the logbook. However, it is important to note that if the business use of the company car is less than 50%, simplified proof of business use is sufficient. Acceptable forms of proof include, for example, travel expense reports, billing documents, or entries in a calendar. So, if you use your company car for business purposes less than 50% of the time, you are not required to keep a logbook.
However, if the vehicle is primarily used for business purposes, you have the choice between the 1% rule or the logbook. Under the 1% rule, the private use of the company car is taxed each month at 1% of the list price. Such flat-rate taxation can be very disadvantageous in many cases. As an alternative, a logbook can be kept to document the exact breakdown of personal and business use. Many business owners find keeping a logbook tedious or complicated. However, it may be worth investing the necessary time in a well-maintained logbook. It is best to seek assistance from a qualified tax advisor. This way, you can be sure that it will actually pay off for you in the long run.
How should a logbook be maintained?
A separate logbook must be kept for each company car. It must be properly maintained throughout the entire year. While there are no explicit legal requirements, there are various established legal precedents. Accordingly, a logbook must meet the following criteria.
- A logbook must be kept in a timely manner. Entries in the logbook must be made as soon as possible. Ideally, this should be done immediately after the trip is completed. However, all trips should be entered by the end of the day at the latest.
- Bound or self-contained format. If a logbook is kept in paper form, it must always be bound. Loose sheets of paper or similar formats are not accepted.
Changes should also always be clearly marked.If you wish to maintain your logbook electronically, a self-contained format is required. Accordingly, it must be ensured that entries are made in chronological order. It is particularly important that subsequent changes are prevented. If changes are necessary, they must be clearly identifiable. A standard Excel spreadsheet is therefore not suitable for use as a logbook.
- Information must be provided for every trip. Every trip, no matter how short, made in the company car must be listed in the logbook. You will learn what information must be provided later in this article.
- Legibility must be ensured. The information in the logbook must, of course, be easily legible. So, if you have poor handwriting, you might be better off using an electronic logbook.
What information must a logbook contain?
For a logbook to be accepted by the tax authorities, certain details must be included. Business owners must enter the following information:
- Date of the trip (time is not required)
- Starting point and destination
- Type of trip (business, personal, etc.)
- Purpose of the trip (for example, “Visit to customer Mustermann GmbH”)
- Mileage readings at the start and end of the trip
- Important! Do not enter rounded mileage
- Route taken in case of detours
If you are unsure which details should be entered, it is advisable to consult a tax advisor. As tax advisors in Düsseldorf and Oberhausen, we are happy to provide you with detailed guidance on the proper use of a logbook.
Which trips must be recorded?
In general, the information listed must be recorded individually for every trip, no matter how short. So if you just make a quick trip to the bakery in the morning, this must be recorded. However, if the trip consists of various segments of a business trip, it is possible to combine these into a single entry. To do this, you simply need to list the individual stops, such as different clients.
What if the logbook wasn’t kept correctly?
If the above requirements are not met, the tax office will not take it lightly. Often, failing to meet just one of the requirements is enough to invalidate the entire logbook. If the tax office finds a deficiency in “proper maintenance,” the entire logbook will not be recognized. In such cases, the company car is taxed for business owners using the 1% rule.
The same applies, of course, to manipulated logbooks. From our years of experience as tax advisors, we know that tax authorities are very good at detecting manipulation. Time and again, clients ask us for help because their logbooks were not accepted due to errors or manipulation. Taxation under the 1% rule can quickly become uncomfortably expensive for business owners. Once the logbook is rejected, it is unfortunately often too late, and even an experienced tax advisor can do little to remedy the situation. That is why we recommend that you schedule a consultation with us in Düsseldorf or Oberhausen before you start keeping your logbook. This way, errors can be avoided from the outset. Our team of tax advisors and certified public accountants looks forward to answering your questions. Please contact us.
