For many employees, their own company car is still an important status symbol. However, a company car is not only representative, it is also an attractive bonus to the salary. If the employer allows drivers to use their company car for private purposes, they must pay tax on the resulting non-cash benefit. In this article, you will find out what is important for company car taxation in 2024 and which methods are available to you as a company car driver.
Company car taxation: What does this mean for employees?
Meal allowance, company cell phone, vouchers: All benefits that employees receive from their employer in addition to their salary are referred to as non-cash benefits. According to §8 of the Income Tax Act the non-cash benefit is equivalent to income and must be taxed accordingly as soon as the limit of 44 EUR is exceeded.
In the case of company cars in the fleet, the non-cash benefit does not arise solely through the ownership of a vehicle. Only if the employer expressly permits the private use of the company car in the employment contract does a non-cash benefit arise for the employer. There are two options for company car taxation: Either a flat rate using the 1% method or by keeping a logbook.
If you have chosen one of the two methods for company car taxation, you must use it for the entire calendar year. It is not possible to switch between the two methods within the year.
Company car taxation with the 1 percent method
If you also use your company car for private journeys, you can apply the 1% rule for company car taxation. This means you pay tax on private journeys at a flat rate of 1% of the gross list price of the company car in Germany at the time of initial registration.
If the company car is also used for journeys between home and work , these must be charged at 0.03% per month. of the domestic gross list price. However, anyone who drives less than 15 days per month with the company car to work, only has to pay 0,002 % of the list price for company car taxation.
Definition of list price
The list price is the manufacturer’s recommended retail price. It usually includes the basic equipment of the vehicle as well as VAT, but no optional extras such as special equipment, transfer costs or discounts granted by the dealer.
Advantages and disadvantages of the 1 percent rule
The advantage of the 1 percent method is that the calculation is relatively simple and time-saving, as you do not have to record each journey individually. However, the disadvantage of this formula for company car taxation is that the calculation method is based on the list price of the company car.
This means that the more expensive the vehicle, the larger the taxable amount. However, a less expensive company car and a long commute can also be detrimental for tax purposes using the 1-percent method. The flat-rate company car tax is therefore particularly worthwhile for employees who frequently use the company car for private journeys.
Calculation example
- Gross monthly income: 3,200 EUR
- New price: 48.000 EUR
- Distance residence → workplace: 30 kilometers for 20 days a month
Calculation:
- 48,000 x 0.01 = 480 Euro
- 48,000 x 30 x 0.0003 = 432 EUR
- 480 EUR + 432 EUR = 912 EUR
This results in a monthly non-cash benefit of 912 EUR, which must be added to the salary as additional income for company car taxation in 2024. Instead of the 3,200 EUR, this results in a gross monthly taxable income of 4,112 EUR for the employee.
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Taxation of company cars with a logbook
If you only make a few private journeys with your company car, it is worthwhile taxing your company car with a logbook. This documents all journeys, whether private or business. Care must be taken to ensure that all trips are recorded as completely as possible and that no additions are made later. The tax office can only determine the correct tax rate for the use of the company car if you keep a complete logbook.
Logbook details
While a mileage entry for private journey is sufficient, you must document the following details for business related journeys:
- Before and after each trip: date, time and mileage
- Destination and purpose of the trip and name/company of the business partners or customers visited
Advantages and disadvantages of the logbook
Company car taxation using a logbook is more complex than the 1 percent method, as every journey has to be recorded. However, this may turn out to be more tax-efficient in the long run. This is because instead of a flat-rate taxation as with the 1 percent rule, the private use of the company car is recorded more precisely with the help of a driver’s logbook.
Using an electronic logbook for the taxation of company cars
An electronic driver’s logbook is particularly useful if you make many trips with your company car and complete documentation is not always possible. As with manual driver’s logbooks, electronic driver’s logbooks may not be subsequently adjusted and thus manipulated. For large fleets, electronic logbooks also make sense in terms of owner liability and driver’s license checks.
Taxation of e-service cars
Drivers of electrically powered company cars not only contribute to greater climate and environmental protection, but also benefit from tax advantages. Instead of 1%, only 0.5% of the gross list price must be recognized as a non-cash benefit when taxing electric company cars.
Since the end of 2023, there has even been a further concession for all electric cars purchased or leased between January 1, 2024 and December 31, 2030: If the list price is less than 70,000 EUR, you only have to pay tax at 0.25 % . And 0.03% of the quartered list price is also charged for journeys between home and work. The German government is currently even planning to raise this figure to 95,000 EUR.
Calculation example
- Gross monthly income: 3,200 EUR
- New price: 48.000 EUR
- First registration: 2024
- Distance residence → workplace: 30 kilometers for 20 days a month
Calculation:
- 48,000 x 0.0025 = 120 EUR
- 12,000 (quarter of the list price) x 30 x 0.0003 = 108 EUR
- 120 EUR + 108 EUR = 228 EUR
For you as a company car driver, this results in a monthly non-cash benefit of 228 EUR, which you must add to your salary for company car tax purposes. Instead of the 3,200 EUR, this results in a gross monthly taxable income of 3,428 EUR.
Which method for company car taxation is worthwhile?
A company car not only offers employees a great deal of flexibility and mobility, it also means financial savings as there is no need to purchase a private vehicle. Whether a driver’s logbook or the 1 percent method makes sense for company car taxation depends on the individual case.
The more private journeys you make with the company car, the more advantages the 1 percent method offers for company car taxation. If you only use the company car infrequently or for short private journeys, you can save more money with the logbook. Accuracy, both in keeping the logbook and in applying the 1 percent rule, pays off at the latest when you file your annual tax return.
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FAQ - Company car taxation
If the private use of a company car is permitted, the employee receives a non-cash benefit. This is regarded as additional income for the employee and must be taxed accordingly.
There are basically two methods available for company car taxation: the 1-percent rule and the logbook. With the 1% rule, 1% of the gross list price of the vehicle is taxed monthly as a non-cash benefit. With a logbook, drivers must document all journeys made with the company car.
The company car taxation of electric cars is similar to the taxation of conventional vehicles. However, electric company car drivers benefit from tax advantages. Under the 1% rule, the non-cash benefit is calculated at only 0.25% or 0.5% of the gross list price, depending on the vehicle type and date of purchase.
When it comes to company car taxation, it often happens that employees do not keep the logbook correctly or incompletely. If details such as mileage, destinations or the purpose of the journey are not sufficiently documented, the tax office can declare the logbook invalid. It also happens that employees do not carefully check the requirements for electric vehicles for reduced company car taxation and lose out on tax benefits as a result.
