Company cars for shareholding managing directors - Documentation requirements have been tightened up
The private use of company vehicles by shareholding managing directors is a classic in external tax audits. A recent ruling by the Federal Fiscal Court (Bundesfinanzhof, BFH) has now significantly tightened up the requirements for proving that vehicles have been used exclusively for business purposes.
Clarification by the BFH - Proof required on a case-by-case basis
In its ruling of 12.3.2026 (case reference: I B 17/24), the BFH clarified that a simple contractual ban on private use is not sufficient to rule out the recognition of the benefit to the user for tax purposes. In fact, in a specific case it must be demonstrated that there was actually no private use. To substantiate this, the BFH pointed to the special status of shareholding managing directors. Given their capabilities of exerting a controlling influence over a company’s assets, in principle, it would also be possible to make private use of company vehicles. In the absence of appropriate evidence, this access option justifies the assumption that there is joint business and private use.
The use of several high-end vehicles requires …
In the case in question, a sole shareholding managing director had access to several high-end vehicles. Admittedly, there was an explicit ban on private use, however, there was no documentation of any kind, such as, a logbook. Consequently, the fiscal administration assumed that there had been private use and estimated this to be a flat rate of 25% of the vehicle costs. The resulting benefit was treated as a constructive dividend. This classification was confirmed by the Federal Court of Justice.
The tax consequences are enormous. At the level of the company, the assumption of a constructive dividend normally leads to an add-back to the off-balance-sheet accounts and this increases the tax burden in respect of corporation tax and trade tax. Moreover, a capital gain is recognised for the shareholder.
… dependable documentation of the business use
This ruling makes it clear that providing proof of actual use is prioritised. In practice, where there is an agreed contractual ban on use, it would therefore be advisable to additionally maintain a proper logbook in order to dependably document the exclusive business use. In future, merely formal regulations that are not actually implemented will scarcely be recognised. Furthermore, the use of a company car should be clearly and consistently regulated in the managing director’s contract and in shareholders’ resolutions. These agreements must also actually be put into practice in order to be valid for tax purposes. In particular, where several vehicles are available, there is a greater risk that the fiscal administration will assume that there is private use. Finally, the choice of taxation method must also be carefully reviewed.
