The company car: list price, commute and logbook

A sales manager drives a company car with a gross list price of 48,000 € and lives 25 kilometres from the office. Every payslip shows 840 € of extra taxable pay, although not a cent more reaches his account: 480 € for private use, 360 € for the commute. Were the car fully electric, the payslip would show just 210 € — one quarter.

Two provisions, one valuation rule

A company car that may also be driven privately gives its driver something he would otherwise pay for out of taxed income. German tax law captures this benefit in two places: for the business owner as a withdrawal, for the employee as a benefit in kind. The arithmetic is the same in both cases.

For the business owner the rule sits in section 6(1) no. 4 sentence 2 of the Income Tax Act (EStG), and it carries a condition. The vehicle must be used for business purposes more than 50 percent of the time. Only for such a vehicle does the provision prescribe the flat-rate valuation; below that threshold it does not apply.

For the employee, section 8(2) sentence 2 EStG points to the same provision and declares it applicable accordingly. This displaces the general rule of sentence 1, under which benefits in kind are valued at the usual end price at the place of supply. What a comparable rental car would cost is therefore irrelevant.

For the employer this creates a recurring duty. The benefit is wages, it goes through wage-tax withholding every month and appears at year end on the wage tax certificate covered in the second module. A company car left off the payroll is therefore not the employee's oversight but a payroll error.

One boundary first: bicycles that are not motor vehicles fall outside this rule. For business owners, section 6(1) no. 4 sentence 6 states expressly that private use of a business bicycle is disregarded. This module therefore deals only with cars and other motor vehicles.

The 1 percent rule and what the list price covers

The core of the rule is brief. For each calendar month, 1 percent of the domestic list price is taken, meaning the price at the time of first registration. The cost of optional extras is added, and everything is counted including VAT. The result is a fixed monthly amount, however many private kilometres were driven.

List price means exactly that. What counts is not the amount the business actually paid but the catalogue price. A dealer discount of twenty percent lowers the acquisition cost but not the benefit in kind. Negotiating hard at purchase saves not a single euro of wage tax.

The same holds for used cars. Because the list price at first registration counts, a five-year-old car is valued as if it were new. Its market value may long since have fallen to a third; the monthly flat rate stays the same for as long as the car is provided.

Leasing changes nothing either. The instalment the business pays plays no part in the valuation. For the employee it makes no difference whether the car is bought, leased or rented — the list price at first registration is the same figure in all three cases.

Optional extras are included because they raise the value of the vehicle. Choosing a model with navigation, sunroof and tow bar carries those items into the base. VAT is included as well, even where the business has recovered it as input tax.

The monthly basis has a consequence that often surprises. The law speaks of each calendar month, not of each day of use. The wording provides no daily apportionment; someone who had the car for only part of a month cannot derive a pro-rata amount from it.

Electric and hybrid vehicles: the acquisition date decides

For electric vehicles and externally chargeable hybrid electric vehicles the list price is not taken in full. Sentence 2 provides five variants, and which one applies depends on the acquisition date and on the vehicle's characteristics. What matters is not the year being taxed but the year the vehicle was acquired.

The most favourable variant is number 3. For acquisitions after 31 December 2018 and before 1 January 2031, only a quarter of the list price is taken. The vehicle must emit no carbon dioxide at all per kilometre driven, and its gross list price must not exceed 100,000 euros.

The price limit works as a threshold. An electric car at exactly 100,000 euros still gets the quarter; one at 100,001 euros does not, and not in part either. What is often missed is what follows: the vehicle does not fall back to the full list price.

Numbers 4 and 5 apply precisely where number 3 does not. Number 5 covers acquisitions after 31 December 2024 and before 1 January 2031. It takes half the list price if the vehicle emits at most 50 grams of carbon dioxide per kilometre or has an electric range of at least 80 kilometres.

A fully electric car above the price limit emits zero grams and so meets the first of these conditions. If it is acquired in that period, half its list price applies. Anyone who uses the full list price here sets the benefit twice as high as the law requires.

For plug-in hybrids the condition has tightened over time. Number 4 covered acquisitions from 2022 to 2024 and required at most 50 grams or an electric range of at least 60 kilometres. Since 2025, number 5 keeps the same emission value but requires a range of at least 80 kilometres.

Number 2 governed acquisitions from 2019 to 2021, also at half the list price; hybrids had to meet the conditions of the Electric Mobility Act. Finally, number 1 concerns older vehicles acquired before 2023 that fall under no other number: for them, flat-rate battery costs reduce the list price.

Where do emission value and range come from? The law says so itself: from the vehicle's certificate of conformity under the European rules it names. A brochure figure or a test report does not replace it. The certificate therefore belongs among the records kept for the vehicle's payroll treatment.

The reduction applies to the list price itself. Because the commuting add-on, covered in the next section, refers to the list price as defined in this sentence, it too is calculated on the reduced value. A quarter of the list price therefore means a quarter of the whole flat-rate benefit.

The commute: 0.03 percent per kilometre of distance

If the employee may also use the car for trips between home and the first place of work, the monthly value rises. Section 8(2) sentence 3 then adds, for each calendar month, 0.03 percent of the list price for every kilometre of distance between the two places.

The distance counts, not the route driven. Someone living 25 kilometres from the business takes 25 kilometres, not the 50 of the round trip. The calculation is also monthly, not per trip: whether the employee drives in on twenty days or on eight does not change the flat value.

The add-on only requires that the car can be used for these trips. The law looks at the possibility, not at the number of journeys actually made. Anyone who wants to rule out commuting use must therefore agree that clearly, rather than simply coming in by company car less often.

Section 9(1) sentence 3 no. 4a sentence 3 treats like the commute the trips of employees without a first place of work who must permanently, typically every working day, go to the same place or wide area of activity. How employees deduct their own travel costs is covered in the course on travel costs and home offices.

From what distance does the commute weigh more than private use? The arithmetic is simple: 0.03 percent per kilometre exceeds the 1 percent for private use once more than 33 kilometres add up. At 34 kilometres the add-on is already 1.02 percent of the list price.

In the sales manager's case the distance is 25 kilometres. 0.03 percent of 48,000 euros is 14.40 euros per kilometre, so 360 euros for 25. Together with the 480 euros for private use, his taxable pay rises by 840 euros a month and 10,080 euros a year.

Trips home under a second-household arrangement have their own, much lower rate. Each such trip is valued at 0.002 percent of the list price per kilometre of distance between the own household and the place of employment. Unlike the commute, the calculation here runs per trip.

No value arises, however, if a deduction of work expenses under section 9(1) sentence 3 no. 5 sentences 5 and 6 would be available for the trip. That provision allows one trip home per week. The weekly trip home therefore creates no benefit with a company car; only each further trip in the same week is valued.

The logbook: actual costs instead of the flat rate

The flat rate is not compulsory. Under section 8(2) sentence 4, the value of private use and commuting may instead be the share of the car's total costs attributable to those trips. For business owners, section 6(1) no. 4 sentence 3 opens the same route for their withdrawal.

The price of this choice is two kinds of proof. First, the total vehicle costs must be evidenced by receipts: depreciation or lease instalment, fuel or electricity, insurance, vehicle tax, repairs. Second, a proper logbook must show the ratio of private trips and commutes to all other trips.

The law itself does not describe in detail what proper means. The purpose, though, yields the essentials: the logbook must make the split of trips verifiable for the whole year. A logbook with gaps does not prove the ratio, and without that proof only the flat rate remains.

When is the effort worth it? The flat rate assumes private use that grows with the list price, regardless of how much is actually driven. Anyone driving an expensive car mostly on business, with few private kilometres, pays under the flat rate for use that does not really exist.

An older, largely depreciated car can also favour the logbook. The flat rate keeps being measured on the original list price, while actual costs fall as depreciation runs out. Conversely, the flat rate is convenient and often cheap when there is a lot of private driving and the car is new.

The relief for electric and hybrid vehicles is not lost with the logbook. Sentence 3 adopts the same periods and conditions: the acquisition costs or comparable expenses enter total costs at only half or a quarter. The choice of method therefore does not decide the relief.

A method cannot be picked month by month after the event. Anyone who finds the logbook tedious in spring and drops it has no proof of the trip ratio for the rest of the year. The decision belongs at the start of the car's provision, not at its end.