What you should know about VAT and e-cars!
The issue of purchasing an e-car is a very pressing one at the moment as, notwithstanding the environmental debate, the Austrian government has created various investment incentives in the course of the COVID-19 pandemic, from which e-cars in particular are benefiting in several way. VAT-related matters should, however, also be considered when it comes to purchasing and running an e-car.
1. Acquisition of e-cars
E-cars were made eligible for input tax deduction several years ago. What this means is that the input tax deduction is available for passenger cars and estate cars with a CO2 emission value of 0 g/km. If the electric car is used predominantly for business purposes (> 50%) in a sole proprietorship, it counts as a necessary business asset of the company. It is therefore recorded in the asset register and depreciated over the normal useful life by means of depreciation for wear and tear (AfA). All expenses are initially operating expenses. Any private use of the e-car is then to be recognised as own use. The costs incurred for private use, such as depreciation, repairs, operating costs and financing expenses, must be taken into account on a proportionate basis.
Deduction of input tax
As with any car, an appropriateness test must also be carried out for the e-car (the luxury tax line must be calculated). The appropriateness limit is EUR 40,000 gross.
The amount of the acquisition costs (AK) is used to determine whether an input tax deduction is granted in full or only in part, or whether it does not apply at all. The acquisition costs consist of the purchase price, VAT and the standardised fuel consumption tax (NoVA). The costs for the vehicle registration, transfer costs, tyre fitting etc. are included in the car’s AK.
AK < 40.000 EUR
Where the AK are less than EUR 40,000, there are no restrictions on deducting input tax, as the luxury tax line is not exceeded.
AK > 40.000 EUR und < 80.000 EUR
In such cases, input tax may be deducted, but the portion of the acquisition above EUR 40,000 are subject to own use taxation (expenditure for own use), offsetting the input tax for the portion exceeding the appropriateness threshold.
Example: New price of an e-car EUR 45,000 incl. 20% VAT in 2020
| Gross | Net | Input Tax |
|
| Luxury Tax line |
40.000,00 | 33.333,33 | 6.666,67 |
| Acquisition value | 45.000,00 | 37.500,00 | 7.500,00 |
| Luxury tax line therefore | 11,11% | ||
| Own use | 5.000,00 | 4.166,67 | 833,33 |
– AK under company law: EUR 37,500 + 833.33 (reduction of input tax deduction = increase in AK) = EUR 38,333.33.
– Luxury tax line therefore 13.04% (= 1 – 33,333.33/38,333.33).
– AK under tax law: These amount to EUR 33,333.33 (= maximum amount for input tax deduction).
- AK > 80.000 EUR
If the AK exceed the appropriateness limit by more than 100%, i.e. if they exceed EUR 80,000, no input tax may currently be deducted at all, as they are not deductible for the major part.
2. Ongoing use
When it comes to the costs of ongoing use, a distinction must be made between value-dependent and value-independent running costs.
- Value-dependent operating costs are:
- Repair costs, service, insurance, etc.
Where the original AK are < EUR 40,000, the input tax deduction can be made in full, i.e. 100%, on an ongoing basis if the other requirements are met (correct invoicing, etc.). Where the original AK are between EUR 40,000 and EUR 80,000, the input tax deduction is available to the extent of the tax-recognised portion (excluding the luxury tax line). Where the original AK are more than EUR 80,000, the input tax deduction is not available on an ongoing basis either.
- Value-independent operating costs:
- Road and parking fees, energy costs (charging current), etc.
100% of the input tax can be deducted here, regardless of the original AK of the e-car.
3. Private use of the e-car
Where the e-car is used more for business than for private purposes (< 50%), VAT is generally payable in line with how much the e-car is used for private purposes. This is conditional on the fact that the asset was previously entitled to a full or partial input tax deduction. The following facts must be taken into account:
Private use by the entrepreneur himself
- AK < 40.000
If the entrepreneur uses the e-car for private purposes, e.g. 30%, this share is subject to VAT as own use. This means: 20% VAT must be paid on 30% of expenses/operating expenses. What this means is that 30% of the ongoing operating costs, such as fuel, maintenance, tolls and parking fees, as well as depreciation, should therefore be regarded as own use. There is no own use for the private part of the insurance expense, since input tax cannot be deducted for an insurance policy.
- AK > 40.000 und < 80.000
In the case of e-cars with an original AK of between EUR 40,000 and EUR 80,000, the value-dependent operating costs must first be reduced in accordance with the luxury tax line. The luxury tax line reduces the input tax deduction where it is fully deducted (100%). The input tax deduction for value-dependent operating costs is only permitted to the extent of the costs recognised for tax purposes. The own consumption is then to be calculated from these tax-recognised costs and subjected to VAT (with the exception of insurance expenses).
- AK > 80.000
In the case of e-cars with an original AK of more than EUR 80,000, own use is not subject to tax as the input tax deduction does not apply either. It is our view that this only applies to the use of the vehicle, not to the running costs, which may be eligible for input tax deduction.
This issue is seen as being controversial in the relevant literature due to the lack of an explicit legal regulation on the taxation of own use of e-cars by the entrepreneur himself. However, in the absence of any regulations to the contrary, it must be assumed that private use is subject to VAT, as is the case, for example, with trucks. This was also confirmed by the Ministry of Finance during the 2016 Salzburg Tax Dialogue.
Private use by the employee (benefit in kind)
If the entrepreneur provides the e-vehicle purchased for the company to employees as a benefit in kind for private use, this normally constitutes a transaction relevant for VAT purposes and generally means that VAT is payable. Depending on the specific manner in which this provision is made in individual cases, different assessment bases are to be used when subjecting the benefit in kind of zero-emission e-vehicles to VAT. A distinction can normally be made between three different cases:
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Case 1: Benefit in kind as part of an overall compensation package – link to benefit-in-kind value for payroll tax purposes
The value of the benefit in kind is zero for zero-emission e-vehicles. Linking VAT to the benefit-in-kind value therefore means that the normal value to be used for VAT assessment is also zero. The result is that the granting of a benefit in kind is essentially not taxed at the business level when providing e-cars to employees as part of their pay package in return for their work.
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Case 2: Benefit in kind for a fee in exchange for cash or additional cash payment
In such cases, the employee’s consideration here for being given use of an e-vehicle is not work, but cash. This means that the employee pays the employer a fee for being given use of the vehicle. In this case, the VAT is to be assessed on the fee paid by the employee for using the e-car. This results in the benefit in kind being (at least partially) taxed.
- Case 3: Benefit in kind without payment
This is the case if an e-car originally purchased for business purposes is later given to an employee in its entirety and not just for temporary use. As there is no exchange of services for a consideration, providing the e-car for use here would constitute a benefit in kind without payment with own use. The assessment basis here would also be a benefit-in-kind value of zero, which effectively means no taxation.
Private use by the shareholder/managing director > 25%
The company provides its materially involved shareholders (shareholders/managing directors with a shareholding of > 25%) with an e-vehicle for their work and private use, which was originally purchased for the company with full input tax deduction from the purchase price.
Shareholders/managing directors are normally not qualified as entrepreneurs under the VAT Act (UStG). Private use is taken into account in payroll accounting by applying the statutory benefit-in-kind value. As of the 2018 assessment year, the benefit-in-kind value is also zero for shareholders/ directors, which means that the own use is not taxed here either.
If the shareholder/managing director is an entrepreneur as defined by the VAT Act (UStG), there is still no need to tax own use as the assessment base is zero.
The same results are obtained when leasing the e-vehicles in question to the managing directors.
4. Sale or resale of the e-car
If the e-vehicle is subsequently sold and input tax is deducted in full or in part, this constitutes a delivery that is generally subject to tax. Exemptions here include tax-free export deliveries to third countries or intra-Community deliveries.
Continuation of the example: e-vehicle sold in 2023 for EUR 30,000 gross. In this case, the proceeds must be subject to VAT in their entirety = EUR 25,000 net * 20% VAT = EUR 5,000 VAT. When it comes to e-vehicles for which tax had to be paid on own use in the year of purchase, a positive input tax adjustment can be made in respect of this proportion.