Provision of vehicles to employees remains a transaction similar to a barter transaction

Work performance as remuneration for the provision of a company car?

The Saarland Fiscal Court had to decide on the turnover taxability of providing vehicles to employees for private purposes in Germany. The main point of contention was whether this was done for payment. The tax court rejected this and referred the question to the ECJ as to whether the local regulations for the "hiring out of a means of transport to non-taxable persons" should be applied to such a gratuitous provision. The ECJ answered this question in the negative. The Fiscal Court took this as a reason to treat the vehicle transfers as non-taxable in Germany. In part, a general departure from the previous taxation practice in Germany was derived from this.

Regular barter-like turnover

The Federal Fiscal Court now ruled in the appeal proceedings that the transfer of the company car was to be seen as a transaction similar to a barter transaction and thus taxable in Germany, thus contradicting the lower court. In its question to the ECJ, the lower court had limited itself to the issue of determining the location and had not addressed a possible consideration. The reason for the classification as barter-like turnover was the direct connection between the provision of the company cars and the (partial) work performance of the employees. Such a direct connection was to be assumed in any case if the transfer of use of a company car was regulated individually in the employment contract. For reasons of labour law alone, this was the rule.

Judgment provides legal certainty

The ruling of the Federal Fiscal Court removes the uncertainty that arose after the fiscal court rulings. As a result, everything remains the same in the vast majority of cases. There is a need for action in those cases in which, as a result of the ECJ's ruling, the provision of company cars to employees was treated as not taxable (in Germany). Appeal proceedings that had been suspended in view of the present decision can be resumed. After the ruling, it remains conceivable in principle that company cars may be provided free of charge - however, these are likely to be exceptional cases.