The obligation to keep a logbook applies to all self-employed person and companies claiming VAT deductions on the use of a car for business purposes. To avoid rankling the tax authorities, it is a good idea to follow a few guidelines. How does the logbook itself affect tax, who is affected by it, how should it be treated and what should be avoided?
All VAT payers who use a company car cannot avoid the duty of maintaining a proper logbook. Of course, they are only entitled to a tax deduction if the car is used for business. Private use must be excluded from the deduction.
Those who are not VAT payers, but who prove the use of the vehicle within the framework of income tax, are also required to fill in the logbook. However, there is an exception for those who use a flat-rate expenditure for transport by road motor vehicle. They do not actually have to keep a logbook.
Surprisingly, there is no mention of the logbook in the law, but it is the easiest tool to prove expenses to the authorities when dealing with irregularities and has become a generally accepted practice.
Occasionally, you'll hear of someone filling in the logbook several months or years back. This is rather brazen, especially in view of the tight deadlines for submitting the documentation. The tax office will most likely end up finding out anyway, as the taxpayer will not be able to trace and prove everything exactly according to reality.
Purely business use of a car is often unrealistic and may not be worthwhile
When claiming a VAT deduction on the purchase of a vehicle, the taxpayer must determine or estimate the proportion in which the vehicle will be used for business and private purposes. In practice, it is not recommended to estimate that the car will be used 100% for business purposes for two reasons. In reality, most cars are not used purely for business purposes, and in the case of taxpayers, the accuracy of the assertion can be easily verified and analysed.
Since company cars are also sometimes used for things like shopping, going to the pharmacy or picking up the kids, it is recommended that in most cases the business use is set at approximately 80%. One hundred percent business use is difficult to prove and even the presence of a child seat in the car may be enough for the authority to challenge the claim. However, if the car in question is replacing an end-of-life car, the estimate should be based on the proportion in which the previous car was used.
In the last tax year of the same tax year, the taxpayer will adjust the estimated deduction entitlement according to the reality.
The ratio between business and personal use must be continuously adjusted
However, this is not where the matter ends from a VAT point of view. For the next four years after the year of acquisition, the taxpayer must monitor the vehicle and if the ratio decreases by more than 10%, they must still adjust the deduction claimed and reimburse part of the VAT to the state. Of course, it also works the other way around, i.e. part of the deduction may be reclaimed if the ratio increases by more than 10% compared to the first year.
In the area of VAT, it is annoying that the right to deduct is assessed for each supply received. In practice, this means that the VAT on each receipt relating to the operation of a vehicle is subjected to a simple test for full or partial entitlement to deduction. When the car is used for mixed purposes, the taxpayer is again only entitled to a partial deduction. These include, for example, fuel, washing, servicing, maintenance and operating lease payments. For these operating expenses, it is a one-time reduction and the taxpayer does not return to them in subsequent years.
In practice, the above-mentioned proportional claims for VAT deduction are normally determined and proven according to a properly kept logbook.
The more detailed the logbook, the easier it is to prove
The trip record in the logbook must include the date, the odometer reading at the start and end of the trip, the place of departure and arrival, and the amount of fuel used, including the price and the purpose of the trip. In addition, the time of departure and arrival, the start and end time of any safety stops, the route and crossing points and, for foreign journeys, the toll.
This clarifying information is useful in proving accuracy to the tax office and it is possible that without it in the logbook it would still be queried by the office and difficult to trace back.
In some cases, the authority also sends official requests for the preventive regular submission of the logbook as part of tax administration cooperation. However, this is not the purpose of the logbook, which serves as a record for resolving irregularities, not for ongoing control. In such a case, an appeal can be lodged against the notice.
The office has software that runs through the entire logbook and usually finds discrepancies in, for example, kilometres between towns, fuel consumption or odometer readings according to the technical inspection station. This is usually not due to foul play, but it can create avoidable administrative burdens for companies. In all cases, our tax specialists strongly recommend proper and clear logbook keeping, which can help businesses avert many unexpected problems.