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. However, if the employer allows the company car to be used for private purposes, the resulting non-cash benefit must be taxed. In this article, you will learn what is important when it comes to taxation and what methods are available to you for this as a company car driver.
What is a non-cash benefit?
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 Section 8 of the German Income Tax Act, the non-cash benefit is equivalent to income and must be taxed accordingly as soon as the limit of 44 euros is exceeded .
In the case of a company car, the imputed income does not arise solely from the ownership of a vehicle. Only if the employer in the employment contract also includes the private use of the company car is expressly permittedIf the employer expressly permits the private use of the company car, a non-cash benefit arises for the employer. There are two options for taxing the non-cash benefit: Either at a flat rate with the 1% method or by keeping a logbook.
If you have chosen one of the two methods, it must be used for the entire calendar year. It is not possible to switch between the two methods within the year.
Taxation of the company car with the 1 percent method
If you also use your company car for private journeys, then you can apply the 1 percent rule for taxation. To this end, private journeys are taxed monthly at a flat rate of one percent of the gross list price of the company car in Germany at the time of initial registration. The list price is the manufacturer’s recommended retail price. It is irrelevant whether the car was purchased or leased and how old it is.
If the company car is also used for journeys between home and work , these must be taxed at 0.03% of the gross list price in Germany each month. However, anyone who drives their company car to work for less than 15 days a month only has to apply 0.002% of the list price.
The advantage of the 1-percent method is that the calculation is relatively simple and time-saving, since it is not necessary to record each trip individually. However, the disadvantage with this formula 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 taxation with the 1 percent rule is particularly worthwhile for employees who frequently use the company car for private journeys.
Calculation example
- Gross monthly income: 3,200 euros
- New price: 48.000 Euro
- Distance residence → workplace: 30 kilometers for 20 days a month
Calculation:
- 48,000 x 0.01 =480 euros
- 48,000 x 30 x 0.0003 = 432 euros
- 480 Euro + 432 Euro = 912 Euro
This results in a monthly imputed income of 912 euros, which must be added to the salary as additional income. Instead of the 3,200 euros, this results in a gross monthly taxable income of 4,112 euros for the employee.
Determining the imputed income with the driver's logbook
If you only make a few private journeys with your company car, it is worthwhile to have a driver’s logbook for tax purposes. All journeys, whether private or business, are documented in it. Care must be taken to ensure that all trips are recorded as completely as possible and that no additions are made later.
Only if the logbook is kept without gaps can the tax office determine the correct tax rate for the use of the company car.
The procedure for determining the non-cash benefit via the driver’s logbook is more complex than the 1 percent method, as every journey must 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. While a mileage entry in the logbook is sufficient for private journeys, the following details must be documented for business journeys:
- Before and after each trip: date, time and mileage
- Destination and purpose of the trip as well as name/company of the visited business partners/customers
Use an electronic logbook
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. As with other electronic solutions, you should always keep data protection in mind, as a unique movement profile is created on the basis of the driver’s logbook. Therefore, you should ensure that the data is secure and not accessible to unauthorized third parties.
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 e-vehicles.
Since 2020, there is even another concession for all electric cars purchased or leased between December 31 and 2018 and January 01, 2031 : If the If the list price is less than 60,000 euros, only 0.25 % of the be And 0.03% of the quartered list price is also charged for travel between home and work.
Calculation example
- Gross monthly income: 3,200 euros
- New price: 48.000 Euro
- First registration: 2022
- Distance residence → workplace: 30 kilometers for 20 days a month
Calculation:
- 48,000 x 0.0025 = 120 euros
- 12,000 (quarter of the list price) x 30 x 0.0003 = 108 euros
- 120 Euro + 108 Euro = 228 Euro
For the company car driver, this results in a monthly imputed income of 228 euros, which must be added to the salary. Instead of the 3,200 euros, this results in a gross monthly taxable income of 3,428 euros.
Conclusion – Which method for the taxation of company cars 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 logbook or the 1-percent method is used depends on the individual case. The more private trips are made with the company car, the more advantages the 1-percent method offers. If the company car is used only rarely or for short private journeys, more money can be saved with the driver’s logbook. Accuracy, both in keeping the driver’s logbook and in applying the 1% rule, pays off at the latest in the annual tax return.
