Private trips logbook - What you should consider!
26. Jul 2022 | By Malena Gaertner
Anyone who is also allowed to use their company car privately must pay tax on the non-cash benefit for the private journeys. A logbook must be kept to prove which journeys were made privately and which were made for business purposes. The following section will discuss what needs to be taken into account, how the logbook is to be kept and what special features there are.
What should be considered when using a company car for private journeys?
More and more employees are using their company car not only for work, but also for private purposes. Of course, it is practical to use the company car to do the shopping, visit relatives or even go on vacation. However, it is important to note that the employer's permission must be obtained for this, because it is not permitted to use the company car for private purposes without the express permission of the superior.
If this use is generally permitted, the details must be clarified. For example, may other family members such as the spouse also use the company car, or may vacation trips also be taken abroad with the car? Furthermore, insurance must also be regulated in the context of private use. In order to agree to this in a legally secure manner, a company car transfer agreement should be concluded in which the most important points are contractually agreed.
If the company car is used not only for business purposes but also for private purposes, the employee incurs a so-called non-cash benefit. This non-cash benefit must be taxed at the employee's individual tax rate. This is done automatically via payroll accounting. According to the ruling of the Federal Fiscal Court of October 6, 2011 (Case No. VI R 56/10), private use does not include the exclusive use of the company car only for commuting to work. In this case, taxation would not be required.
Private trip logbook or 1-percent method?
The employee can choose between two options for taxing the non-cash benefit. Firstly, the company car can be taxed at a flat rate according to the 1 percent method. With this method, it is irrelevant how the company car is used. Whether for commuting, business trips or private use, 1 percent of the gross list price of the car is used as the basis for taxation. This method is particularly suitable for employees who frequently use their company car privately and the car is only a few years old.
In addition, the employee can decide to keep a logbook. This method is particularly suitable for employees who make little private use of the company car or whose company car is already of a certain age. All journeys made with the company car must be documented in a logbook. What this looks like exactly is described in more detail below.
It is important to note that it is not possible to switch between the 1 percent method and the logbook method just like that. This is only the case if there is a change of year or if the company car is exchanged.
How are private journeys to be documented in a driver's logbook?
Every trip with the company car must be entered in a driver's logbook. In addition to the name of the driver or the kilometers driven, it must also be recorded whether it was a business or private trip. It is important that business and private trips are strictly separated from each other. Likewise, the route to work can be selected as a category.
The tax office mainly checks business-related trips. These must be recorded precisely with the reason for the trip as well as the address and the name of the person or company visited. This not only ensures a high time expenditure, but also reveals quite a lot of information about the driver's activity to a third party. For data protection reasons, the requirements for the documentation of private trip logbooks are therefore significantly lower. If it is a private trip, certain information such as the specific purpose of the trip or the address of the friend visited does not need to be provided. It is only sufficient to document the driver, the date and time of the trip as well as the kilometers driven and the mileage. Even if less information needs to be entered for private trips, care must still be taken to ensure that the entry is made properly so that there are no problems with the tax office in the end
The tax office generally always assumes that the company car is also used privately. Therefore, the tax office must be proven wrong by a properly kept logbook. Therefore, the logbook method is also only worthwhile for employees who use their company car predominantly for business purposes.
Special case of mixed runs
When carrying out purely business or purely private journeys, documentation with the driver's logbook is simple. Each journey is recorded separately and categorized accordingly. In the case of so-called mixed journeys - both business and private - it is the detour that matters. Per se, it is permitted to make a detour for private reasons as part of a business journey. A typical example is taking children to school on the way to the customer. In the driver's logbook, the length and the reason for the detour should be specified in the case of a mixed journey. In this way, a proportional coding into private journey or business journey is possible.
Company car for commuting only
Anyone who only uses their company car for commuting to work does not have to pay tax on a non-cash benefit using the 1 percent method. This was clarified by the Federal Fiscal Court in its ruling of October 6, 2011 (Ref. VI R 56/10). However, the distance kilometers must be added to the salary at 0.03 percent of the gross list price. The employee can claim these costs as income-related expenses in the tax return.
If, on the other hand, the employee has opted for the driver's logbook method, the journeys must be categorized accordingly as a work trip. In this case, taxation would also not take place. For the documentation of the work trip, it is sufficient to enter in the driver's logbook the date, the distance traveled and the mileage at the beginning and end of the trip.
Private use of company car Logbook method
When using a driver's logbook, the inspection by the tax office is always very precise. The driver's logbook must be kept continuously and be complete. Like most financial documents, it must be kept for at least ten years. For the inspection, the auditors compare workshop invoices or fuel receipts with the entries in the driver's logbook and can thus quickly detect incorrect entries.
In general, the logbook should be kept close to the time of the trip. Subsequent entries run the risk of trips being forgotten or mileage readings being incorrect. The logbook is only recognized by the tax office if it is complete and without gaps. If an error is made during the entry, the correction must be made in such a way that it can be traced by a third party.
Furthermore, the driver's logbook must be kept properly. Thus, a bound or at least closed form must be used. There are appropriate driver's logbook templates available for purchase in stationery stores. Handwritten notes or printed excel sheets are not accepted. This is also the case if pages are torn out or added to a bound driver's logbook.
If the driver's logbook method is selected for the private use of company cars, it must be designed to be tamper-proof. Entries may therefore only be made with a document-proof pen. Pencil or fountain pen entries are not permitted, as a correction cannot be traced.
In addition, it is important that the information in the logbook is as accurate as possible. Abbreviations should only be used if they are commonly used. In particular, when a business trip is made, the customer and their address should be listed accurately.
Great care must be taken when keeping the driver's logbook. Gross deficiencies will result in the vehicle being subject to subsequent taxation using the 1 percent method. This can lead to additional claims for wage tax and social security contributions. It should be noted that a separate driver's logbook is kept for each vehicle.
Handwritten or electronic?
A private journey logbook can be kept handwritten or electronically. the electronic variant is just as permissible, provided that the tax requirements are met. This means that the logbook must be designed to be tamper-proof, so that subsequent changes are documented and are no longer possible after a certain point in time. Especially in conjunction with a GPS module, an electronic private journey logbook can be a great support. By combining GPS and software, the journeys are automatically recorded and transferred to the electronic logbook. This includes important data such as time, date or mileage. The driver then only has to classify that it was a private journey. In some cases, the systems are also self-learning, so that they automatically categorize for recurring routes.
The seven-day rule applies to the addition of information in the electronic driver's logbook. This means that changes and additions can only be made within a seven-day period. After that, the file is write-protected and can no longer be edited. In addition, the changes made are recorded in a change history so that a third party can track them.
Special case of permanent employment and self-employment
If the employee is given a company car by his employer for private use and at the same time pursues a self-employed activity, the following procedure is to be followed. Trips with the company car in the context of the self-employed activity are to be marked as private trips in the logbook. The reasoning for this is that it was not a business trip for the employer that was business-related. However, self-employed persons can claim the expense for the private trips as a business expense if they have incurred costs.
Keeping a logbook of private journeys is particularly worthwhile for employees who make little private use of their company car. Drivers often shy away from the logbook method because they associate it with a high level of documentation effort. Yet numerous regulations have been issued in recent years to make it easier to record private journeys and to lower the hurdles. In addition, electronic logbooks now provide aid that make it easier for drivers to keep a logbook.