Parking space rent reduces non-monetary benefit
Parking space rent reduces non-monetary benefit
Companies often provide company cars to their employees. Where private use is permitted, for example under the terms of a company car policy, this is deemed to constitute “enrichment” of the employee and thus leads to an inflow of income. The employer can use either the 1% gross list price method or the logbook method to value this non-monetary benefit. If the employee pays the employer a usage fee for non-work-related use of the company car, this reduces the value of the non-monetary benefit and applies regardless of the valuation method chosen.
The plaintiff provided its employees with a company car, which could also be used privately. The plaintiff calculated the non-monetary benefit according to the 1% rule. As there was a shortage of parking spaces in the surroundings of the office premises, the plaintiff offered all employees - irrespective of the use of the company car - to rent a parking space for a fee of EUR 30 per month. The dispute concerned the reduction of the non-monetary benefit by this amount. As part of an external wage tax audit carried out at the plaintiff, the tax office concluded that the payment for the parking space at the first place of work may not reduce the flat-rate usage value according to the 1% method. In the opinion of the tax office, these costs were not necessarily incurred and therefore did not form part of the total costs of the vehicle.
The Cologne tax court ruled in favor of the employer's appeal against this in its ruling dated April 20, 2023 (case no. 1 K 1234/22). According to the explanations of the tax court, the taxable benefit of the employee generally consists of the difference between the value of the transfer of use - as determined on a flat-rate basis in the case in dispute - and the usage fee to be paid by the employee. This also applies if the employee bears individual costs of the company car himself in the context of private use; in any case, the employer then does not pay the employee wages to the extent that the legislator wanted to standardize with the 1% rule.
According to the wording of the law, such payments by the employee form part of the “total expenses incurred by the vehicle”. Such costs are those directly intended for the maintenance and operation of the vehicle and which inevitably arise in connection with its use. In accordance with the established case law of the Federal Fiscal Court, parking space costs are included in costs of that kind. Pursuant to established BFH case law, parking space costs are counted as such costs. The court did not agree with the tax office's point of view that only parking space costs at the employee's place of residence can be considered. The relevant supreme court case law on parking space costs at the place of residence did not explicitly differentiate between parking space costs at the place of residence and the place of work.
From the point of view of the Cologne tax court, however, a parking space is essential for the use of a company car. If a car may be used for trips between home and the primary place of work, the parking space at the place of work is just as essential as the parking space at home. The fact that only a small number of free parking spaces are available near the office further emphasizes the importance of the company car parking lot. The car parking lot costs also serve to protect against theft and damage as well as to ensure local availability for trips. Consequently, the parking space was rightfully considered when determining the non-monetary benefit.
The plaintiff provided its employees with a company car, which could also be used privately. The plaintiff calculated the non-monetary benefit according to the 1% rule. As there was a shortage of parking spaces in the surroundings of the office premises, the plaintiff offered all employees - irrespective of the use of the company car - to rent a parking space for a fee of EUR 30 per month. The dispute concerned the reduction of the non-monetary benefit by this amount. As part of an external wage tax audit carried out at the plaintiff, the tax office concluded that the payment for the parking space at the first place of work may not reduce the flat-rate usage value according to the 1% method. In the opinion of the tax office, these costs were not necessarily incurred and therefore did not form part of the total costs of the vehicle.
The Cologne tax court ruled in favor of the employer's appeal against this in its ruling dated April 20, 2023 (case no. 1 K 1234/22). According to the explanations of the tax court, the taxable benefit of the employee generally consists of the difference between the value of the transfer of use - as determined on a flat-rate basis in the case in dispute - and the usage fee to be paid by the employee. This also applies if the employee bears individual costs of the company car himself in the context of private use; in any case, the employer then does not pay the employee wages to the extent that the legislator wanted to standardize with the 1% rule.
According to the wording of the law, such payments by the employee form part of the “total expenses incurred by the vehicle”. Such costs are those directly intended for the maintenance and operation of the vehicle and which inevitably arise in connection with its use. In accordance with the established case law of the Federal Fiscal Court, parking space costs are included in costs of that kind. Pursuant to established BFH case law, parking space costs are counted as such costs. The court did not agree with the tax office's point of view that only parking space costs at the employee's place of residence can be considered. The relevant supreme court case law on parking space costs at the place of residence did not explicitly differentiate between parking space costs at the place of residence and the place of work.
From the point of view of the Cologne tax court, however, a parking space is essential for the use of a company car. If a car may be used for trips between home and the primary place of work, the parking space at the place of work is just as essential as the parking space at home. The fact that only a small number of free parking spaces are available near the office further emphasizes the importance of the company car parking lot. The car parking lot costs also serve to protect against theft and damage as well as to ensure local availability for trips. Consequently, the parking space was rightfully considered when determining the non-monetary benefit.
Notice:
As it has not yet been clarified by the supreme court whether and under what conditions the costs for renting a parking space at the first place of work by the employee reduce the non-monetary benefit from the provision of a company car, an appeal is pending at the BFH (case no. VI R 7/23).