Private use of company car: (1) Flat-rate method for business use
Private vehicle use: Flat-rate method for business use
The 1% method, also known as the flat-rate method, can be applied to vehicles used for business purposes more than 50% of the time. The private use value of the vehicle is determined based on the gross list price, without recording the actual private use. This method is particularly simple as no logbook is required. However, depending on the vehicle and usage behaviour, it may be advantageous or disadvantageous compared to the logbook method.
Example: A business owner uses a vehicle with a gross list price of 30.000 Euro for more than 50% business use. The private use share is determined using the flat-rate method:
- 30.000 Euro x 1% = 300 Euro per month.
- For 12 months, the annual use value is 3.600 Euro (300 Euro x 12 months).
Accident costs and monetary benefit
Previously, accident costs incurred during a private trip were covered by the flat-rate use value. However, since a ruling by the BFH (dated 24.5.2007), this is no longer the case. If the employer waives reimbursement of such costs, this is considered an additional monetary benefit for the employee or business owner and must be taxed accordingly.
Example: A business owner has an accident during a private trip with the company vehicle, resulting in repair costs of 1.000 Euro. The employer covers the costs. Since this is no longer covered by the flat-rate use value, this amount is added as a monetary benefit to the taxable income.
VAT on private use value
The private use value determined using the flat-rate method is also subject to VAT (§ 3 Abs. 9a Nr. 1 UStG). Since not all vehicle costs are subject to input tax, such as vehicle tax or insurance, the determined use value can be reduced by 20% before VAT is calculated.
Example: A vehicle has a list price of 30.000 Euro and the private use value determined using the flat-rate method is 3.600 Euro per year. Since not all expenses are eligible for input tax deduction, the amount is reduced by 20%:
- 3.600 Euro - 20% = 2.880 Euro.
- VAT is calculated on this amount: 19% of 2.880 Euro = 547.20 Euro.
This amount is to be entered in the line “Collected VAT and VAT on gratuitous value transfers” in the VAT return.
Special regulations for electric and hybrid electric vehicles
There are special regulations for electric and hybrid electric vehicles that particularly favour the flat-rate determination of the private use value. For vehicles purchased or leased between 1.1.2019 and 31.12.2030, reduced rates apply.
Electric vehicles until 2030
For electric vehicles with no carbon dioxide emissions and a gross list price of no more than 60.000 Euro (from 2024: 70.000 Euro, from July 2024: 95.000 Euro), the private use share is set at only 0.25% of the quarter list price.
Example: A business owner purchases a pure electric vehicle in 2023 with a gross list price of 50.000 Euro. Since the vehicle is emission-free, the monthly private use share is only 0.25% of the quarter list price:
- Quarter list price: 50.000 Euro ÷ 4 = 12.500 Euro.
- Private use value: 12.500 Euro x 0.25% = 31.25 Euro per month.
- This results in 375 Euro per year as the private use value.
Journeys between home and workplace
In addition to the private use value, a surcharge for journeys between home and workplace is calculated. This surcharge is usually 0.03% of the list price (for electric vehicles halved or quartered list price) per kilometre and month.
Example: A business owner drives 10 km to work daily. The list price of the vehicle is 40.000 Euro. The following surcharge is calculated for journeys to work:
- 40.000 Euro x 0.03% x 10 km = 120 Euro per month.
- This results in 1.440 Euro per year as a surcharge for journeys between home and workplace.
Hybrid electric vehicles: Reduction of benefits
There are also tax advantages for externally chargeable hybrid electric vehicles, which will be gradually reduced in the coming years. Certain minimum requirements for electric range or carbon dioxide emissions must be met to benefit from the advantage.
- Until 2021: The half assessment basis applies if carbon dioxide emissions are a maximum of 50g/km or the electric range is at least 40 km.
- From 2022: The electric range must be at least 60 km.
- From 2025: The electric range must be at least 80 km to continue benefiting from the advantage.
Example: A business owner purchases a hybrid electric vehicle in 2023 with a range of 55 km and a list price of 45.000 Euro. Since the range does not reach the 60 km limit, the full assessment basis applies from 2025, meaning 1% of the full list price is used as the private use value:
- 45.000 Euro x 1% = 450 Euro per month.
- This results in 5.400 Euro per year as the private use value.
Compensation for disadvantages in old cases
For electric and hybrid electric vehicles purchased before 1.1.2019 or not meeting current requirements, there is a so-called disadvantage compensation. In this case, the list price is reduced by flat-rate amounts for the battery system.
Example: A vehicle purchased in 2013 has a battery capacity of 20 kWh. The list price is reduced by 500 Euro per kWh, but by a maximum of 10.000 Euro. In this case, the deduction is:
- 20 kWh x 500 Euro = 10.000 Euro.
- The reduced list price for calculating the use value is therefore:
- Original list price: 50.000 Euro - 10.000 Euro = 40.000 Euro.
