Private use of a company car creates a taxable benefit in kind in Germany. Depending on the situation, it can be calculated using the flat-rate method or a compliant driver's log.
How the 1% Rule Works
Private use of a company car is a taxable benefit in kind. Under the flat-rate method, 1% of the gross list price per month is generally added to taxable employment income.
The basis is the German list price at first registration, including optional equipment and VAT. A negotiated purchase discount does not change this assessment basis. Travel between home and the first place of work can add a separate amount per distance kilometre.
Example (Combustion Engine):
- Vehicle: BMW 3 Series, List Price €60,000
- 1% Rule: €600 monthly taxable income
- The actual net cost depends on personal tax, social-insurance treatment and commuting distance.
Reduced assessment basis for electric cars
For eligible zero-emission electric cars acquired after 30 June 2025 with a gross list price of up to €100,000, only one quarter of the list price is used under the flat-rate method. This corresponds to 0.25% of the gross list price per month. The statutory conditions for the relevant provision period apply.
Example (Tesla Model Y):
- Vehicle: Tesla, List Price €55,000
- 0.25% basis: €137.50 monthly benefit in kind
- The individual net cost follows from the employee's personal tax details.
Under the regular 1% basis, the same list price would produce a €550 monthly benefit in kind.
When is the Driver's Log Worth It?
The driver's log (Fahrtenbuch) is the alternative to the flat rate. Here you only tax the actual share of private costs. It can be cheaper in particular when:
- You drive little privately: If you use the car 90% for business, you only have to tax 10% of the costs.
- The gross list price is high: The flat rate rises with list price, while the driver's log uses the actual private-use share.
- Actual costs are low: With a used company car or a vehicle that has already been fully depreciated.
Disadvantage of Driver's Log: The Effort
A driver's log must be kept promptly, completely and in a closed form. If it is not accepted for tax purposes, the flat-rate method may be applied instead. Electronic logs can support the ongoing record-keeping, but they still need to satisfy the tax requirements.
Conclusion: compare both methods before you choose
Before you order the company car:
- With a low private-use share, a driver's log can be cheaper than the flat-rate method.
- For an eligible electric car, the reduced assessment basis can favour the flat-rate method. The result still depends on list price, commute, private-use share and actual costs.
Include the tax deduction and any salary-sacrifice effect before comparing the company car with a private alternative.
Compare the Company Car with a Private Car
Include the tax deduction and any salary sacrifice in the model.