Recording private usage according to the lump sum method
The private use of a vehicle that is mostly used for business purposes is recognised, for each calendar month, at a lump sum of 1% of the domestic (German) list price at the time of the initial registration plus the costs for special equipment and including VAT. Alternatively, it is also permissible to determine the proportion of private usage on an individual basis by means of a driver’s log book. Smaller lump sums have been applicable since 2019 already for specific electric vehicles and off-vehicle charging hybrid electric vehicles. For hybrid vehicles, 0.5% of the list price is recognised and for purely electrically powered vehicles this is just 0.25%. A corresponding distinction is also made when determining costs in accordance with the driver’s log book method. However, not every electrically powered vehicle will meet the criteria to be able to benefit from the tax concessions; in the following section we first make a distinction according to the type of vehicle.
Tax-privileged electric vehicles
Pure electric vehicles
In Section 6(1) no. 4 sentences 2 and 3 of the Income Tax Act (Einkommenssteuergesetz, EStG) such vehicles are defined as ones that are propelled exclusively by an electrical motor. This covers, in particular, battery electric vehicles and fuel cell vehicles. As of 2020, the non-cash benefit for purely electrically powered vehicles without CO2 emissions has been recognised at one quarter of the assessment base. However, the gross list price may not exceed € 60,000. If it is more than € 60,000 then the benefit goes down to 0.5%
Compensation of disadvantages
For vehicles purchased prior to 1.1.2023 and not accorded tax privileges as pure electric vehicles (section 2.1) or hybrid electric vehicles (section 2.2), as an alternative, it is possible to obtain compensation for these disadvantages [referred to in German as Nachteilsausgleich]. In this case, the list price is reduced by a blanket amount that corresponds to the costs of the battery system that is con-tained in the vehicle. The amount that can be deducted will depend on the battery capacity and the year of purchase; the maximum overall amount is € 10,000.
Overview of the criteria for tax concessions
The relevant criteria for electric vehicles are essentially the cost of the vehicle and when it was purchased. Placing an order is on its own not sufficient, the vehicle has to have actually been delivered. Tax will have to be paid on the use of electric vehicles purchased in the period from 1.1.2019 to 31.12.2030 on the basis of
- 0.25% of the list price if this is not more than € 60,000, or
- 0.5% if the price is more than € 60,000.
For off-vehicle charging hybrid electric vehicles, with effect from 2020, in the context of the lump sum method, tax has been charged on 0.5% of the list price if the following conditions are present:
- maximum carbon dioxide emissions of 50g/km, or a minimum range of 40km when purchased in the period between 1.1.2019 and 31.12.2021;
- maximum carbon dioxide emissions of 50g/km, or a minimum range of 60km when purchased in the period between 1.1.2022 and 31.12.2024;
- maximum carbon dioxide emissions of 50g/km, or a minimum range of 80km when purchased in the period between 1.1.2025 and 31.12.2030.
Please note: The above-mentioned criteria apply in equal measure if a used vehicle is purchased.
Providing electric vehicles to employees for their use
In the context of providing company vehicles to employees for their use, in terms of the payroll tax treatment the above-mentioned concessions will apply accordingly if the vehicle has been or will be made available by the employer for private usage for the first time after the 31.12.2018 and prior to 1.1.2031. Although, in these cases, it is not the date on which the employer purchased, produced or leased the vehicle that is relevant. Solely the date on which the vehicle was made available to an employee for their use is what matters