Luxury Sports Cars as Business Assets

A limited liability company (GmbH) operating in the freight forwarding and transport brokerage sector acquired four high-priced limited-edition sports cars between 2016 and 2022, each at a purchase price of between EUR 200,000 and EUR 280,000, and recognised them as fixed assets. Ongoing expenses such as interest and insurance premiums were deducted for tax purposes. Depreciation (Absetzung für Abnutzung, AfA) was also claimed for the newer models. In the following year, the company acquired another sports car for EUR 480,000.

Luxury Cars Were Stored, Not Used

The luxury cars were not used but were stored on the company’s premises, covered and fitted with tyre protectors. There was no private use whatsoever by the shareholders or managing directors. They had ordinary company cars at their disposal, which could also be used for private purposes, subject to taxation of the corresponding benefit in kind. The company did not generate any income from the sports cars, nor was a sale planned in the short or medium term.

No Private Interests

The tax authority took the view that the luxury cars had been acquired to serve the private interests of the shareholders as collectors. It therefore considered the acquisition to constitute a hidden profit distribution and classified the sports cars as non-business assets of the company. The tax authority argued that the benefit to the shareholders arose from the mere ownership of the vehicles rather than only from their actual use.

However, the Austrian Federal Fiscal Court (Bundesfinanzgericht, BFG) did not follow the tax authority’s reasoning. It concluded that the acquisition was not motivated by the shareholders’ private interests but was instead based on business investment considerations. Consequently, there was no hidden profit distribution. The related expenses, including depreciation (AfA), interest and insurance costs, were therefore deductible for tax purposes.

Legal Background

In the case of corporations whose income is entirely classified as income from trade or business, all assets used to generate such income generally constitute either necessary or elective business assets.

However, if an asset objectively serves private purposes or purposes related to the interests of the shareholders, it constitutes non-business property and cannot be classified as part of the corporation’s business assets, including its elective business assets. Consequently, any income and expenses associated with such assets are disregarded for tax purposes at company level. This may include, for example, assets specifically tailored to the needs of a shareholder or luxury goods such as sports cars.

Tip

The classification of an asset acquired by a GmbH as a business asset or a non-business asset always requires a comprehensive assessment of all the facts and circumstances. In the present case, the decisive factor was that, despite appearing at first glance to be “private” luxury sports cars, the vehicles did not in fact serve the shareholders’ private interests. Instead, they were held by the GmbH as long-term business investments intended to preserve and potentially increase in value.

However, to avoid disputes with the tax authorities in such circumstances, appropriate evidence should be secured in advance and the underlying facts and business rationale should be thoroughly documented.