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Company Cars in Germany

Marie

| 68 Posts

Chartered Member

18 May, 2016 11:26

Is there a simple way for a UK employer to get a German member of staff a company car in Germany?  The rules say that the company cannot own a car in Germany (we do not have a registered office there).  The only option appears to be that we pay a car allowance, but obviously that is a very expensive option.

How do others manage this? 

One option I have considered is if we buy a car on behalf of the employee (so effectively give them a joining gift) but with an agreement that the car will return to the company's ownership if he/she leaves?  Any thoughts on this?

I really want to avoid the expenses of a taxable car allowance if I can and would be very grateful for your experiences or ideas.

Thank you

Marie

  • Ray

    | 2191 Posts

    Chartered Member

    18 May, 2016 12:06

    Marie
    Have you considered a long-term lease? That way the car remains the property of the leasing company who simply bills you each month for supplying it - also you can build into the lase a range of variations like replacement car during service, change of tyres after x thousand km, maintenance & services, repair etc..

    Most of the major international lease companies like Leaseplan have German operations and could advise you on what is possible for you.

    www.leaseplan.de/en.html

    As a final question, if you do not have a German office, then who is the employer of the person working in Germany ?
  • Marie

    | 68 Posts

    Chartered Member

    18 May, 2016 14:40

    In reply to Ray:

    Thanks Ray. We employ in Germany as a foreign employer - so on German employment terms but as a UK company. You can do this in most European countries, other than places like Austria and Demark where you have to do it either as a legal entity or via a PEO.

    This is a good idea and I will explore it. The problem is that the car is for an Account Manager who will be doing a lot of miles. This makes leasing very expensive.

    What do you think about us basically giving him a car (with agreement that it is returned to us if he leaves). He would have declare it as a taxable benefit too. Have you done this?
  • Ray

    | 2191 Posts

    Chartered Member

    18 May, 2016 15:06

    In reply to Marie:

    Marie
    Whether the car is leased or purchased, it will be expensive for an account manager - and remember that long-term lease rates are much lower than standard car hire rates......
    For a purchased car, you will have the massive initial capital outlay, plus all the operating costs (insurance, fuel, maintenance....), plus the administrative costs, plus the hassle of selling the car at a later date......
    A lease will spread the capital costs over a longer period (better cashflow impact), and more importantly will not place an asset on your company's books.
    For ease of administration I would be inclined to take the lease route, unless you have someone in yout team with excellent German to liaise with garages, insurers, car hie companies when the car is off the road etc. particularly if things go pear-shaped and you have a dispute with your employee.
    Explain the situation to a couple of suppliers and ask them to make a proposal for the best cost-effective way to lease in the light of likely mileage and usage.
    Many years ago I did this in Belgium & Germany and asked the suppliers to propose alternative solutions that would give the best TOC (total operating cost) for our specific situation. We chose a solution based on replacing the vehicle every 3 years as opposed to every 4 - this was less expensive in the end, because it allowed for better resale value at the lease end, which in turn impacted the lease cost (depreciation is probably the biggest factor).
    If you were to gift him the car that would create a taxable value on the full purchase price of the car and he would have a massive immediate tax bill. Since "gift" means "poison" in German, the word is apposite..... I simply wouldn't do it.
    Let us know what you finally do - it could be a good learning exercice for others and food for the forum!
  • Marie

    | 68 Posts

    Chartered Member

    27 Oct, 2016 16:23

    In reply to Ray:

    Sorry for the slow update. I was just browsing the forum and found that i hadn't answered your question!

    We took advice from our payroll bureau in Germany and it was OK for us to provide a 'loan' to the employee to buy a car. He has an agreement with us that should he leave, he will return either the car or the original loan amount to the Company. Apparently this doesn't cause a tax problem and was the most pragmatic solution for us (until he runs away with the car!).
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