Posted 14 Jan 2020
Reading time: 6 Minutes
What are the alternatives for employees or the self-employed who want to use their company car privately? We'll tell you which method can save you the most money and which alternatives for employers, employees, self-employed and freelancers are available. In this article we cover company company car regulations in Germany.
How does the monetary benefit work with a company car?
For clarification, company cars are the cars that belong to the business assets of a company. They must either be acquired by a corporation and driven by the managing director himself or an employee of his company, or more than 50% must be used by a partner, the self-employed or a freelancer. In this case, all running costs of the company car, such as fuel, repairs, maintenance or insurance, count as operating expenses. This gives the company in question the opportunity to claim the sales tax paid for the company car as input tax at the tax office. Often, employees but also freelancers, self-employed or shareholders, may use the company car privately. In this case, the person who benefits from the private use of the company car must also tax it.
There are two options for taxing a company car with private use: the 1 percent rule and billing via a logbook. With the 1 percent method, the employee pays the “flat-rate determination of the private use value” of the company car. In plain language, this means that the private user of a company vehicle must tax one percent per month on the domestic gross list price as a monetary benefit. The list price is the non-binding price recommendation that the manufacturer of a vehicle issues at the time of first registration, including VAT. Although this amount is rounded down to a full 100 euros, in addition to this one percent, the user of the company car has to pay another 0.03 percent (also of the domestic gross list price) per kilometer - every month.
Those who opt for billing via logbook have significantly more effort. The logbook must contain certain information, such as the start and end of a business trip, with the date, mileage, the reason for the business trip, the contact details of the business partner visited, and any detours and deviations from the actual travel route. For the documentation of private trips, on the other hand, it is sufficient to note the number of kilometers traveled. A note is sufficient for the distances between the apartment and the workplace. Additional private routes, such as family home trips, which take place due to the double housekeeping, must also be noted separately. The tax office evaluates these for the benefit of the corresponding user.
Does a company car still pay off today?
Due to the high flat-rate financial burden for the 1 percent rule for company cars, switching to billing according to the logbook is certainly an interesting alternative. Under certain circumstances, several thousand euros can be saved each year. However, one should know that the tax office is extremely strict in keeping such a logbook. It is crucial that all entries are complete and cannot be changed again at a later time. For example, it is not permitted to keep your logbook in an Excel list. The tax office only recognizes logbooks that are available in bound form, do not contain any blank lines and in which all changes are clearly understandable. An alternative to the bound logbook is the electronic logbook. This automatically records all trips by activating the integrated GPS tracker and the SIM card as soon as the vehicle starts.
In order to determine the costs for the private use of a company car, special gross-net salary calculators are suitable, which take into account the statement "with company car" in their calculation. There you can see at a glance how much of your net wages remains if you have to pay taxes on the private use of your company car.
What other alternatives are there for private users of company cars?
If you opt for an e-company car instead of a petrol-powered company car, you benefit in two ways: electric company vehicles are particularly environmentally friendly. In addition, however, the tax burden is also significantly lower than for petrol-powered cars. For all electric company vehicles whose first registration is between 1/1/2019 and 12/31/2030, the private usage share is only 0.5 percent - instead of the 1 percent rule that applies to gasoline and diesel. Accordingly, you only have to pay 0.5 percent of the gross list price of the vehicle in taxes to the tax office each month if you use an electric company car privately. And the kilometers driven “cost” only half as much.
New regulation for more economical fleet management and more electromobility
The 1 percent rule could therefore soon be a thing of the past. On the one hand, because in most cases, accounting with a logbook is significantly more worthwhile. On the other hand also because the taxation of e-company cars is only half as expensive and therefore represents an extremely attractive alternative. Until the end of the year, you can still change the billing model to increase your monetary advantage in relation to your company car. However, if you can't avoid taxing private use, you can bargain with the tax office with the 0.5 percent rule on electric company cars. By switching to electric mobility, entrepreneurs can give their employees an environmentally friendly type of corporate benefit. On the one hand, this increases a company's employer branding and, on the other hand, electric vehicles significantly reduce CO2 emissions, which in turn benefits the environment.