Many entrepreneurs use a company car. At the end of the 6-year depreciation period, you often sell the car and buy a new one. What to consider when selling a company car in terms of warranty and tax law? When selling the old vehicle, mistakes can be made that have tax or legal consequences. This article explains what entrepreneurs should look out for in order to avoid unforeseen additional costs and hassle. With the knowledge from this article, you can specifically prevent errors that can be expensive and cause you trouble with the tax office or the tax authorities. can bring in the law.
Selling a company car: these rules& conditions to be observed!
Those who want to sell their company car must take into account the obligation of taxing the profit. The sales price and book value are decisive. Attempts to achieve a higher price than the book value are curbed by taxes on the profit. For the sale it plays a big role whether the vehicle belongs to the private or company assets. The tax-free sale of a company car could be realized with a private withdrawal from the company assets, in which case the support of a tax advisor is advisable. If the company car is sold to a private individual, the liability for material defects must be observed, which extends over a period of 2 years. The decisive question is whether a possible defect was already present when the vehicle was handed over. A contractual exclusion of the warranty is not possible in the case of the sale of a private company car. If you want to avoid the warranty when selling the company car, you must sell it to another trader. Attempts to circumvent the warranty when selling the company car to a private buyer should be viewed very critically. Your survival in court is questionable.
Sale of the company car with profit is taxable
Business owners usually use the proceeds from the old company car to make down payments on the new car. If you succeed in getting a good price, you will be even more pleased. But the tax authorities want to collect their share of the sales profit. The profit that the tax office interested, results from the book value and sales price. If you succeed in selling your company car at a higher price than it is listed in the books, this profit is added to the total profit and is therefore taxable fully taxable.
Is the company car part of the private or company assets??
Although the designation suggests unambiguity, this is not always the case. A company car only counts as a business asset if it is regularly used for more than 50 % of the company’s business. Private assets in relation to the company car are to be assumed if the business use is less than 10%. If the use of the vehicle in the business is between 10 and 50 %, the vehicle can be classified either as private or business property. In this case, it is advisable to consult an experienced tax advisor. Tax advisors recommend documenting business trips precisely when allocating them to private assets. Such documentation can help to dispel doubts on the part of the tax office. It is not possible to make a general statement as to which option is more favorable from a tax point of view. Here, a precise examination or rather calculation is required in each individual case.
Learn more about the classification of the vehicle as business or private assets
When selling a company car, it makes a difference whether the car is sold for a good price or not private assets or at business assets belongs. Because: if you use your company car less than 10%, it belongs to your private assets and the profit from the sale is not taxable. Detailed information on the classification of the vehicle as a private or business asset is provided in the article "company car for the self-employed".
If in doubt, you should consult your tax advisor and clarify what is best for you in terms of the overall tax situation.
Calculating the tax burden before the sale: this is how it works!
It is advisable to keep the tax burden in mind when selling the car. The following is an example from a gmbh, with 30% corporate income tax on the profit:
Assuming that the residual book value of the car is 5.000 €. At the time of the sale, the company earns 11.000 €. This means that a profit of 6.000 € in the books. The corporate income tax eats up 30 % of this, i.e. a total of 1.800 €. The entrepreneur still has 4.200 € left.
The taxes are quite steep and can lead to a rude awakening for unprepared entrepreneurs. Therefore, the tax burden should be calculated exactly, in order to be able to grasp the real profit for a new investment exactly.
Taking a car used for business purposes out of business assets as a private withdrawal?
If you are thinking about selling a company car tax-free, you would have to sell the car to a private person take out of the company. Fiscally this way out is called "withdrawal-sale-model". In short, they take the car out of the business assets and transfer it to their private domicile. However, you should always consult your tax advisor about such a project, because there are pitfalls lurking here, too. For example, the removal must be indicated in the accounting be documented. If mistakes are made, there may be sales tax problems.
Warranty obligation: sale to private individuals with conditions
The law on liability for material defects was revised in 2002. If you sell your company car to a private individual, you must 2 years long time liable for all defects that go beyond typical wear and tear. The prerequisite for this is that the defect was already present at the time of handover. Liability for material defects cannot be excluded by contract when selling to private individuals. Anyone who includes such a clause in the contract is acting illegally. Such a clause is not effective. However, if you sell the car to a used car dealer or to another company, you can agree on the exclusion of warranty.
Is it possible to avoid the warranty obligation for private individuals??
Whether it is possible to avoid liability for material defects when selling to private individuals is a question that many entrepreneurs have already dealt with. Since this issue is frequently asked about, here are some tips on how to deal with the warranty obligation when selling to private individuals, which other traders have already tested. However, you should think carefully about their application!
Not legal: selling a company car privately
Business owners tend to sell a company car under the "private" label. The detour runs, for example, through the entrepreneur himself (withdrawal-sale model) or through another private person.
First, the gmbh sells the car to the entrepreneur or to a related private person.
This sells the vehicle then to another private person and imagines itself thereby from the adhesion.
It should be expressly noted at this point that this detour is risky. There are now court rulings that confirm that this detour via private individuals who are close to the commercial enterprise is not permissible. They say, where there’s no plaintiff there’s no judge, but if the private buyer of the former company car does sue and goes to court, you will have a bad hand. It remains as it is: the exclusion of liability for material defects is not effective. The consequences can be rectification of defects, a reduction in the purchase price or compensation for damages.
Critical: selling a hobbyist vehicle
In view of the impossibility of selling a company car from private to private without a warranty obligation, self-employed persons sometimes come up with the idea of calling the car a hobbyist’s vehicle. "company car – bought as seen" or "company car to be sold as a hobbyist vehicle" are advertisements that already indicate existing defects. However, this does not change the facts. Legal liability for material defects cannot be ruled out in this way either. When the going gets tough, they lose out.
Conclusion: warranty obligation remains in force when selling to a private party
The bottom line is that you can only sell a company vehicle without a warranty obligation to another tradesman if the latter confirms the effective exclusion of the statutory liability for material defects by signature. The sale to a private person is subject to the legal regulations and you remain liable for material defects for 2 years. The practical examples outlined above must be viewed very critically, as the exclusion of materiality in the private sector would most likely not be upheld in court.
Summary/FAQ selling a company car: what to pay particular attention to?
Selling a company car, what to consider?
When selling a company car, it should be noted that the tax office would like to make a profit (= sales proceeds are above book value) in the form of taxes. This sum must be taken into account in order to make a solid calculation. When selling a company car to a private individual, the liability for material defects must be taken into account, which cannot be completely ruled out, even in a roundabout way. Only when selling to another trader can warranty be contractually excluded.
When to sell a company car?
Many entrepreneurs decide after the expiration of the depreciation period (usually 6 years) to sell the company car and purchase a new vehicle. Thus new depreciations are possible again. For the new company car, the profit is often directly reinvested, which can be achieved when selling a company car despite taxation.
Selling a company car: what happens when defects are covered up??
If you sell the company car privately, you are generally bound by the 2-year warranty. This applies to defects that already existed when the vehicle was handed over. Anyone who knows about the defects and knowingly/intentionally conceals them can be prosecuted for such fraudulent misrepresentation.
How many company cars are allowed/possible?
There is no fixed value, but the number should be appropriate for the business model and the activity. The principle of reasonableness also applies to the type of company car. So it must not automatically be a supposed luxury car as a prestige object.
What applies when freelancers sell a company car?
There are no significant differences to commercial or industrial vehicles. There are no special regulations. At the time of purchase, this investment must be depreciated if it is used primarily for business purposes. The consideration takes place in the income surplus calculation. If the company car is used more than 50% for business purposes, the logbook method or the 1% rule can be applied for tax purposes.
Selling a company car as a sideline business: what applies??
There are no differences in this scenario either. The proportion of business use for allocation to business assets is identical, as is the obligation to pay tax on the non-cash benefit. In many cases, it can prove to be the better option to use the vehicle privately and to claim the necessary business trips as travel expenses in the tax return.