Company car taxation: How it works

What's covered in this article

1. What exactly is a company car?
2. Subscription-based company cars: simpler, more flexible, and tax-advantaged
3. Methods for taxing company cars (including JobAuto via salary conversion)
4. Three tips to save on company-car taxation
5. FAQ: Company car taxation

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What is a company car?

A company car is a vehicle registered to a company and made available to an employee. Depending on the agreement, it may be used only for work or also privately. Typically, it must be used at least 10 % for business purposes.

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Important: Private use of a company car must be taxed, as it represents a non-cash benefit for the employee.

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Terms like Firmenwagen, Dienstwagen, Firmenauto, or Dienstauto all mean the same thing—there’s no difference.

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Types of company cars:

• Pool cars: Shared among employees (e.g., for errands or off-site meetings). The employer covers all costs and, if private use is allowed, the employee must tax that usage.
• Leased cars: Companies often lease vehicles to preserve liquidity. Lease payments count as business expenses, and the company avoids depreciation and resale risk. But the gross list price must still be taxed, regardless of actual cost.

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Company Car Subscription: Simpler, More Flexible, Tax-Efficient

Car subscriptions (Auto Abo) have become a popular, flexible alternative to leasing, pool cars, or traditional company cars. Key benefits include:

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• Shorter terms—typically 6–12 months, unlike long-term leases.
• Wide model selection: hybrids, EVs, station wagons, SUVs, etc.
• Full-service platforms: employees book a vehicle online and pay a flat monthly rate that covers insurance, maintenance, and more—no need for HR to manage insurance or damage claims.

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This model offers companies a modern mobility benefit that’s both easier to manage and more flexible.

Company Car Taxation: What Are the Options?

If company cars are used privately, tax rules apply. Employers and employees typically choose between two main options:

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• 1-percent rule (1-% method)
• Logbook method

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Additionally, there's a flat-rate taxation option.

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1-Percent Rule

This is the most common and easiest method:

• Employees are taxed monthly on 1 % of the gross list price of the car as a non-cash benefit.
• Employers withhold wage tax, social contributions (and if applicable, church tax and solidarity surcharge) based on that amount.
• An additional 0.03 % of the list price per kilometer between home and work is also taxed

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Example: A €50,000 car, taxed at 1%, yields €500 monthly. A 20 km commute adds another €300, for a total taxable benefit of €800/month. At a 25 % tax rate, that’s €2,400 per year in taxes.

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Electric vehicles benefit from reduced taxation:

• Acquisitions from 2020: list price under €60,000 → only 25 % is taxable (0.25% per month). Over €60,000 → 50 % is taxable (0.5% per month).
• From January 1, 2024: list price ≤ €70,000 → 0.25 %; above → 0.5 %. Applies also to plug-in hybrids with ≥ 80 km electric range or ≤ 50 g/km CO₂.

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These tax reductions are meant to promote cleaner vehicles.

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Logbook Method

If a car is available for private use but used infrequently, this method may save money:

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• Only actual private usage is taxed, based on a properly maintained logbook.
• Requires more effort, but digital logbook solutions can greatly simplify administration.

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Example: If 30 % of use is private and total annual costs are €10,000, the taxable benefit is €3,000.

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Flat-Rate Taxation

Employers can opt to tax commuting trips (home–work) at a flat 15 % rate—no social contributions. Assumes 15 trips per month.
Applicable up to the amount of the commuter allowance (~€0.30/km); anything above is taxed at the individual rate.

Tips to Save on Company Car Tax

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1. Choose the right vehicle: Lower list prices reduce tax. EVs offer even lower rates—0.25 % or 0.5 % depending on the price threshold.
2. Limit private use: Less private driving means lower taxable benefit. You can even restrict private use contractually or offer flexible alternatives like a JobAuto subscription.
3. Share costs: Employees contributing to acquisition or running costs (e.g., extra features, private fueling) reduce taxable benefit.
4. Offer a JobAuto: This is a tax-efficient alternative blending a car subscription and salary conversion. Employees can save up to 40 % versus private subscriptions, all wrapped into a full-service package.

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FAQ: Company Car Taxation

• What is a company car? A vehicle provided by the employer for business (and possibly private) use.
• Who benefits from a company car? It makes sense for employees who travel frequently for work, especially under the 1 % rule.
• Monthly cost? Depends on model, mileage, and taxation method—company-car calculators help estimate.
• Tax rates?
  • Combustion engine: 1 %
  • Plug-in hybrid: 0.5 %
  • Electric (≤ €70,000): 0.25 %
• Private use allowed? Minimum 10% must be business; contracts may define annual limits (15,000–30,000 km).

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