Insights
TAX & BUSINESS
Luxury Sports Cars as Business Assets
A recent decision of the Federal Fiscal Court (BFG) provides important clarifications on the tax treatment of luxury goods in the business assets of a GmbH.
A GmbH operating in the freight forwarding and transport brokerage sector had purchased four high‑price limited‑edition sports cars between 2016 and 2022, with purchase prices each ranging from EUR 200,000 to EUR 280,000, and had capitalised them as fixed assets. Ongoing expenses such as interest and insurance premiums were deducted for tax purposes. For the newer models, depreciation (AfA) was also claimed. In the following year the company acquired an additional sports car for EUR 480,000.
Luxury cars were only stored, not used
The luxury cars were not used but stored on the company premises – covered and fitted with tyre protectors. There was no private use by the shareholders or managing directors; they had ordinary company vehicles available, which could also be used privately against a deemed benefit‑in‑kind. The company derived no income from the sports cars, and a sale was neither planned in the short nor in the medium term.
No private interests
The tax office assumed that the acquisition of the luxury cars served the private (collector) interests of the shareholders. Accordingly, it regarded the cars as a hidden distribution and qualified them as non‑business assets of the company. The tax office argued that the benefit to the shareholders lay in mere ownership rather than in the use of the vehicles.
The BFG did not follow this argument of the tax office and concluded that the acquisition was not based on any private interests of the shareholders, but rather stemmed from business investment considerations, meaning that no hidden distribution exists. The tax deduction of the expenses (AfA, interest, insurance) was therefore permissible.
Legal background
For corporations whose income is wholly attributable to trade or business income, all assets that serve the generation of income generally belong to the necessary or discretionary business assets. However, if an asset is objectively recognisable as serving private or corporate‑law purposes, it constitutes necessary private assets and cannot be counted as (discretionary) business assets of the corporation. Consequently, related income and expenses remain tax‑neutral at the company level. This includes assets that are specifically tailored to the needs of a shareholder, or indeed luxury goods such as sports cars.
Tip: When classifying an asset acquired by a GmbH as business assets or as non‑business assets, a holistic assessment of the facts is always required. In the present case, the decisive factor was that the ostensibly “private” luxury sports vehicles did not actually serve the private interests of the shareholders, but were held by the GmbH as a long‑term, business investment. To avoid disputes with the tax office, appropriate evidential safeguards should be put in place and the facts well documented in such a configuration.
Luxury cars were only stored, not used
The luxury cars were not used but stored on the company premises – covered and fitted with tyre protectors. There was no private use by the shareholders or managing directors; they had ordinary company vehicles available, which could also be used privately against a deemed benefit‑in‑kind. The company derived no income from the sports cars, and a sale was neither planned in the short nor in the medium term.
No private interests
The tax office assumed that the acquisition of the luxury cars served the private (collector) interests of the shareholders. Accordingly, it regarded the cars as a hidden distribution and qualified them as non‑business assets of the company. The tax office argued that the benefit to the shareholders lay in mere ownership rather than in the use of the vehicles.
The BFG did not follow this argument of the tax office and concluded that the acquisition was not based on any private interests of the shareholders, but rather stemmed from business investment considerations, meaning that no hidden distribution exists. The tax deduction of the expenses (AfA, interest, insurance) was therefore permissible.
Legal background
For corporations whose income is wholly attributable to trade or business income, all assets that serve the generation of income generally belong to the necessary or discretionary business assets. However, if an asset is objectively recognisable as serving private or corporate‑law purposes, it constitutes necessary private assets and cannot be counted as (discretionary) business assets of the corporation. Consequently, related income and expenses remain tax‑neutral at the company level. This includes assets that are specifically tailored to the needs of a shareholder, or indeed luxury goods such as sports cars.
Tip: When classifying an asset acquired by a GmbH as business assets or as non‑business assets, a holistic assessment of the facts is always required. In the present case, the decisive factor was that the ostensibly “private” luxury sports vehicles did not actually serve the private interests of the shareholders, but were held by the GmbH as a long‑term, business investment. To avoid disputes with the tax office, appropriate evidential safeguards should be put in place and the facts well documented in such a configuration.