Germany Company Car Tax: The 1% Rule Explained (2026)

If your employer lets you use a company car privately, not just for business trips, German tax law adds a monthly benefit-in-kind (geldwerter Vorteil) to your taxable income under § 6 Abs. 1 Nr. 4 EStG. For a petrol, diesel, or standard hybrid car, that's 1% of the Bruttolistenpreis (the German gross list price including VAT and factory options, not what your employer actually paid) every month, plus 0.03% of that same list price for every one-way kilometer you commute. On a €50,000 car with a 20km commute, that works out to €800 a month added to your taxable income, €9,600 a year, whether you drive the car twice a month or every single day.

The Investitionssofortprogramm, effective 14 July 2025, raised the Bruttolistenpreis cap for the reduced 0.25% BEV rate from €70,000 to €100,000, for vehicles acquired after 30 June 2025. Below that €100,000 cap, a genuine battery-electric company car is taxed at 0.25% instead of 1%, one quarter of the combustion rate, with the commute add-on scaled down to 0.0075% per km. Above €100,000, the rate steps up to 0.5% (0.015% per km commute), still half the combustion rate. If you're pricing a company car in 2026, don't use the older €70,000 or a rumoured €95,000 figure, €100,000 is the current cap.

It depends entirely on how you actually use the car. If you drive extensively for personal trips, or you'd rather not keep paperwork, the 1% rule is simpler and often not much more expensive. If you drive almost exclusively for business, roughly 85% or more of your mileage, and the car has a high Bruttolistenpreis relative to its running costs, a meticulously kept Fahrtenbuch (logbook) can tax you on only the real private-use share instead of a flat percentage of list price, which is usually cheaper for that profile. The catch is that Finanzamt auditors scrutinise Fahrtenbücher closely, and any gap or inconsistency in the log can get the whole thing thrown out in favour of the 1% method anyway.

No, and this is worth being honest about upfront: the income-tax-only figures in this article, and in the Germany Company Car Tax Calculator, cover the extra Einkommensteuer, Solidaritätszuschlag, and Kirchensteuer the benefit-in-kind triggers. In most real payroll setups, statutory social insurance (Rentenversicherung, Krankenversicherung, Arbeitslosenversicherung, Pflegeversicherung) is also charged on a company car's geldwerter Vorteil, because it counts as beitragspflichtiges Arbeitsentgelt for SV purposes. That means the real net cost to you as an employee is typically somewhat higher than an income-tax-only estimate shows, ours included.

Plug-in hybrids don't get the reduced EV rate automatically. A PHEV only qualifies for the 0.5% rate (with the 0.015% commute add-on) if it meets a minimum all-electric range of roughly 80km or a CO2 threshold under about 50g/km. Fall short of either and the car is taxed at the full 1% combustion rate, exactly like a petrol or diesel Firmenwagen. The worked numbers in this article, and the EV toggle on the calculator, apply only to genuine battery-electric vehicles, so check your specific PHEV model's certified range before assuming the lower rate applies to you.

This is a genuinely nuanced area, and a documented simplification in most flat-rate calculators including ours. The 0.03%-per-km add-on (Fahrten Wohnung–erste Tätigkeitsstätte) was designed around a full commuting pattern, and real Finanzamt guidance on part-time office attendance, hybrid work, and days worked entirely from home is more detailed than a simple monthly multiplier can capture, including an alternative per-trip method some payroll teams use instead of the flat monthly rate. If your office attendance is irregular, it's worth asking your payroll department or a Steuerberater which method they're actually applying to your Lohnabrechnung.