Applicability of the 1% Rule in Salary Conversion for VAT Purposes

• Company cars are often incentives for employees
• Private use of company cars by employees is generally considered a taxable service
• A basis for assessment must be determined for this service
• Payroll tax flat rates are commonly used in practice
• Recently, tax audits have become more restrictive regarding the use of the 1 percent method for VAT purposes in salary conversions
• The tax administration increasingly opposes the applicability of the 1 percent rule
• They argue that there is no barter-like transaction in these cases
• The employee’s consideration is seen as a regular payment, not a partial work performance
• This payment is considered a higher gross salary conversion
• Affected taxpayers face significant tax back payments

Source: datenbank.nwb.de

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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