No deduction for employment-related expenses for a private car if a company car is not used?
In its judgement of 21 January 2026 (VI R 30/24), the Federal Fiscal Court (BFH) ruled that expenses incurred for business travel using a private car are generally not deductible as income-related expenses if a company car is available for business use and its use would not have incurred any additional costs. The ruling demonstrates that ‘cross-use’ for private reasons – for example, where the company car is made available to another person and the private car is used instead – must be carefully examined in terms of income tax and travel expense regulations.
The case at hand: business travel by private car despite the availability of a company car
An employee was entitled to use a company car, which he taxed under the 1% rule. His wife was also permitted to use the car, provided that no business-related reasons prevented this. For business trips undertaken in the company car, the employer reimbursed all fuel costs; where a private vehicle was used, a mileage allowance of EUR 0.30 was provided on an exceptional basis.
The employee undertook three business trips in his private sports car and claimed actual travel costs of EUR 2.28 per kilometre. The company car was to remain available at home during this time. The Lower Saxony Finance Court initially allowed the deduction; the Federal Fiscal Court overturned the decision and dismissed the claim.
By Stefan Sperandio and Johanna Wolter
Annual Tax Act 2026 – Draft Bill
At the end of May, the Federal Ministry of Finance (BMF) presented the draft bill for the Annual Tax Act 2026. Among other things, the draft contains numerous amendments relating to payroll tax law. Below, we provide an overview of points that are particularly relevant to business practice.
Basic pay for Sunday, public holiday and night-time allowances (Section 3b (2), first sentence, of the Income Tax Act (EStG))
In response to the Federal Fiscal Court (BFH) judgement of 10 August 2023 (VI R 11/21), the Federal Ministry of Finance (BMF) has proposed an amendment to the definition of basic pay for Sunday, public holiday and night work allowances in Section 3b(2), first sentence, of the Income Tax Act (EStG), with effect from 1 January 2027. Under the amendment, only the taxable regular wages – and not those subject to flat-rate taxation under Section 40 of the EStG – are to be used as the basic pay for calculating tax-free Sunday, public holiday and night work allowances. In addition, the tax-free employer contributions under Section 3 Nos. 56 and 57 of the Income Tax Act (EStG) are to be included in the calculation.
This will provide employers with legal clarity regarding the calculation of allowances when determining which wage components are to be included.
By Stefan Sperandio, Johanna Wolter and Norbert Nikolai Wahnsiedler
New External Audit Regulations (ApO) – Implications for the Payroll Tax External Audit (LStAP)
On 10 July 2026, the Bundesrat approved the External Audit Regulations (ApO), which will come into force on the day following their publication in the Federal Tax Gazette. They replace the previous Business Audit Regulations (BpO 2000) in order to adapt the tax audit procedure to the current legal framework and to significantly speed it up. Of particular relevance to employers: for the first time, the on-site payroll tax audit is regulated independently and in greater detail in the general administrative regulation.
The change in scope of application (Section 1)
Previously (Section 1(2) BpO 2000): The BpO applied to on-site payroll tax audits only to a limited extent. It was classified as a ‘special on-site audit, to which only a selected catalogue of provisions was to be applied ‘mutatis mutandis’.
In future (Section 1 ApO): The ApO expressly applies to all field audits within the meaning of Section 193 of the German Fiscal Code (AO) – “in particular tax audits, field audits of payroll tax and special VAT audits”. Consequently, everything applies in principle to field audits of payroll tax, with the exception of a list of exclusions (Section 1(3) ApO).
By Stefan Sperandio, Johanna Wolter and Sara Rahimi
Carsharing instead of a company car: a mobility benefit with tax advantages
Flexible, sustainable, cost-effective – and, in some circumstances, more favourable from an income tax perspective than the traditional company car: usage-based carsharing is emerging as an attractive mobility solution. Those who understand the rules can lower their tax burden, reduce administrative workload and, at the same time, offer a benefit that goes down well with staff. We outline the specific advantages – and what matters when it comes to implementation.
Why usage-based carsharing is becoming attractive to many companies
Hybrid working models, ESG targets and the desire – particularly among younger employees – for flexible mobility are changing the requirements for company car schemes. Carsharing strikes a chord here: on demand use rather than fixed vehicle allocation, no idle costs, no extensive fleet management, and significantly streamlined administration. What’s more, the rigid flat-rate valuations for company cars (such as the 1% or 0.03% rules) do not apply here – instead, flexible and often more cost-effective valuation methods become available.
By Stefan Sperandio, Johanna Wolter, Valeria Pia Ciko and Silas Rosing
Extension of the Digital Payroll Interface (DLS for short) – Amendment to Section 4 (2a) of the LStDV
From 1 January 2027, companies will be required to provide the tax authorities with data from front-end and back-end systems in a structured format, in addition to traditional payroll account data.
Practical implications
The Seventh Ordinance Amending Tax Regulations introduced, amongst other things, an amendment to the Payroll Tax Implementation Ordinance (LStDV). The focus is on the expansion of the Digital Payroll Interface (DLS).
By Stefan Sperandio, Johanna Wolter and Norbert Nikolai Wahnsiedler
© 2017–2026 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
Follow us
