Company car taxation is an ongoing issue in accounting

4 years ago

If a company car is made available to employees, tax consequences must be observed. New administrative instructions provide clarity.

Non-cash benefit

Many companies provide their employees with a company car. The company car is then often used not only for professional reasons. For example, even the way from the private home to work is often covered by company car. If the employees can also use the vehicle privately, this is a so-called non-cash advantage. This non-cash benefit must be determined and taxed. Especially in wage tax field audits, the wage tax deduction for the company car is repeatedly scrutinized.

There are various methods for evaluating the non-cash benefit:

1% regulation or
Logbook

Taxation with the 1% rule

The 1% rule is also referred to as the flat-rate value in use method. The employee’s private trips are taxed at a flat rate of one percent of the domestic list price. The journeys between the home and the first place of work are calculated by 0.03% of the domestic list price multiplied by the distance between the home and the first place of work. Family trips home in the case of double housekeeping must also be charged (0.002% of the domestic list price per kilometre between the first place of work and the home).

Logbook method

With a logbook, private use is not determined in a lump sum, but the journeys are precisely recorded according to business or private journeys. The total costs of the vehicle can then be calculated – according to the private and professional share – and the individual usage value can be determined. So if the vehicle is only used privately to a very small extent, this variant can be cheaper in terms of income taxation. However, strict requirements are also placed on the logbook.

BMF letter explains the most important principles

The extensive letter from the Federal Ministry of Finance dated 3 March 2022 explains the most important principles for the wage tax treatment of the provision of a company car to employees. For example, it explains in detail what counts as the total cost of the vehicle in the logbook method.

In addition to the 1% rule and the logbook method, it explains, among other things:

How can the valuation method be changed?
What are the consequences of a driver provision?
How is it to be assessed for wage tax purposes if leasing is involved?
How does the wage tax deduction change if the employee makes an additional payment to the acquisition costs?

Special features for electric vehicles

More and more companies and citizens in Germany are using electric or hybrid vehicles. This is also tax-subsidized by the legislator. There are wage tax benefits for these vehicles, for example. In this case, only a fraction of the list price is to be applied to the 1% rule. The non-cash benefit is thus significantly lower for electric and hybrid vehicles – and thus also the wage tax burden.

By the way: The letter from the Federal Ministry of Finance of 7 February 2022, III C 2 – S 7300/19/10004 :001 provides information on the VAT consequences

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Author

Sylvia Meier
Guest Author

Sylvia Meier is a certified financial economist (FH) and has worked at the tax office, in consulting (Big Four firm), and for a specialized publisher. Today, as a freelance consultant, she supports companies and can demonstrate numerous publications, particularly on the topics of taxes, controlling, accounting, and finance.

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