What is the Company car benefit and 1% rule?

Explore the tax benefits of company cars and the 1% rule in Germany, with special advantages for electric car users and those with short commutes, making it a win-win for both employers and staff.

When an employer provides an employee with a company car, it is called a company car benefit. A company car can often be used not only for business purposes but also for private journeys. The free use of a company car for private purposes constitutes a benefit in kind for the employee and is therefore taxable income.

The private use of a company car is calculated monthly at 1% of the gross list price in Germany at the time of first registration. This calculation basis applies to new, used, leased, and re-imported vehicles.

Example of 1% rule calculation

• An employee is provided with a company car which he/she may use both privately and for journeys between his/her home (e.g. 22 km) and his/her first place of work.
• Details of the company car:

→ Price of the car: EUR 30,000
→ National list price (gross): EUR 32,675

Special rules for electric cars

The costs for private use must also be calculated and taxed for electric vehicles used for business purposes. The basis of assessment is the gross list price at the time of first registration plus optional extras.
For private use of electric vehicles, only half of the gross list price (=0.5% hybrid regulation) or a quarter for pure electric vehicles (=0.25% regulation) has to be taken into account. Which regulation is applicable depends, among other things, on the time of purchase.

Purchase of electric vehicles from 01/01/2020 and before 01/01/2031

Are there other exceptions?

If you drive your company car to work less than 15 days a month, you only need to think about 0.002% for each kilometer you drive. You must be able to provide the tax office with proof of your actual working days per month.
So the shorter your commute to work and the less your company car costs, the lower the taxes for you.