Taxation of private use of electric vehicles

Taxation of private use of company electric vehicles is significantly more advantageous compared to the same taxation of a conventional vehicle. There are three different situations. Firstly, the private use of an electric vehicle by the entrepreneur must be assessed. Secondly, one must also pay attention to private use during his daily trips to the workplace. And thirdly, a taxation of the private use of a company electric car by an employee is also possible. One can choose between two methods to calculate the taxable advantage. On the one hand, you can choose a flat-rate calculation. The gross list price of the electric vehicle is decisive here. On the other hand, a logbook can be used to determine the exact relationship between operational and private use of electric vehicles. In this way, you are then able to share the costs that an electric car entails.

If a company’s purely fuel vehicle is used for at least 50% operational purposes, then private use by the entrepreneur or by other persons, including his employees, constitutes a private financial advantage. It is therefore also taxable. There are two main methods for this: the so-called 1% regulation as a flat rate and the journey log method. When taxing the private use of electric vehicles, however, there are modifications to the calculation method that are of great advantage for tax purposes.

Tax advantage electric vehicle: which vehicles benefit?

Before we get into the matter of taxing the private use of electric vehicles, which are part of a company's operating assets, we clarify a few terms about the beneficiary vehicles. On the one hand, of course, purely electrically driven vehicles are included, i.e. those that use a battery as an energy store. On the other hand, this also includes the still rare vehicles with hydrogen-based fuel cells (so-called energy converters). For better distinction, we want to call them pure electric vehicles in the following.

The externally chargeable plug-in hybrid vehicles must be distinguished from this. Although these also have certain advantages in the taxation of private use, they are lower due to the combustion engine that also exists and the associated emissions.

Taxes for private use of electric vehicles: legal basis

Here we distinguish between those rules that apply to entrepreneurs and beneficiaries belonging to their group of persons and those that apply to employees who have an electric car at their disposal. For the company, the private use of electric vehicles means that part of the costs, which normally reduce the profit as an expense, is to be regarded as private removal by the entrepreneur. In contrast, the provision of an operational electric car to an employee represents a monetary advantage. As a result, this amounts to an indirect remuneration and is therefore subject to both payroll tax and social insurance.

2.1. Flat-rate determination of private collection

The convenient method to measure the private use of electric vehicles is the flat-rate calculation. Here, the gross list price including optional equipment of the electric vehicle is decisive. In the case of private use of an electric car by the entrepreneur, the calculation provisions of § 6 (1) no. 4 sentence 2 EStG apply. In principle, the calculation method for determining the taxable private removal is similar to that used hitherto for conventional motor vehicles. In detail, however, one finds the modifications that give rise to the tax advantage in the private use of electric vehicles.

2.2. Determination of private collection by means of a journey log

2.2.1. Determination of private use of a company car via the journey log

Different is the determination of the financial advantage in the private use of electric vehicles, if a logbook forms the basis for this. In general, you can then determine on the basis of the information stored in the journey log, how many kilometers the electric car was on the road in the company or in the private context. This ratio is then used to allocate the total cost of operating the electric car. Of course, all costs actually incurred must then also be documented. Above all, however, it is the constant keeping of the journey log that, in contrast to the flat-rate calculation method, means the actual effort.

2.2.2. Are electronic logbooks permitted?

Although there are now also many manufacturers of electric vehicles technical aids, which can be called electronic logbook. However, the recognition of these tools as a properly maintained and thus approved by the tax office is also based on the fact that all records are actually made in a timely manner. Even a workshop stay can have a restrictive effect. In addition, the now also confirmed by the tax courts of the view of the proper management of a journey log also means that subsequent changes should be excluded as far as possible. If they still occur, then these changes must be logged.

For these reasons, the use of electronic logbooks as proof of private use of company cars should be critically examined, even if the tax courts do not advocate a general restriction on the applicability of electronic logbooks.

2.3 Private removal of the entrepreneur for his daily journeys to work

If an entrepreneur uses a company electric car every day to drive from his home to work, this is also considered taxable according to § 4 (5) EStG. Here, too, the calculation method provides a tax advantage over the use of a company car with an internal combustion engine. In detail, however, the deduction of the distance fee of EUR 0,30 per km distance between home and workplace is also allowed, as it is also used as a commuter fee for employees in their advertising costs.

2.4. Which method is worthwhile?

Of course, the two calculation methods for determining the private use of company cars provide different values and thus lead to different taxes on them. But you can usually estimate this in advance, so that you can use the cheaper method. However, one can also proceed in such a way that one determines only after the expiry of the assessment period on the basis of the actual data which of the two approaches requires the individually more favorable tax. But for this it is necessary to keep a journey log from the beginning.

Concrete savings potential can be identified in the following scenarios: Whoever as an entrepreneur uses his company car only to a small extent for private trips, has the greatest advantage in the application of the logbook method in principle. This applies all the more the higher the gross list price of the company car. On the other hand, the flat-rate calculation is particularly attractive for those entrepreneurs who travel relatively much with their company vehicle for private purposes. If the gross list price is still relatively low, then the comparable advantage is even more obvious.

For electric vehicles, including plug-in hybrids with certain characteristics (electric range or limited CO2 emissions), the legislator grants a tax advantage. This reduces the gross list price used as a basis for assessment by a certain factor. A distinction is made between five cases depending on the time of purchase, the actual type of drive as well as the battery capacity and the gross list price of the electric car. As a result, the legislator ensures that those companies that switched their fleet to climate-friendly electric drives early on receive a greater tax advantage as a reward.

3.1. Purchase of an electric vehicle before 01.01.2023

If the purchase of a pure electric vehicle or hybrid electric vehicle was made before 2023, then the amount of taxable private use of the vehicle according to the battery capacity and the date of first registration shall be calculated as follows:

Electric vehicles, including plug-in hybrids, purchased by December 31, 2013 will receive the highest possible deduction of EUR 500 per kWh of battery capacity. However, this applies to the battery capacity that the electric car had at the time of first registration; Retrofits or an actual operational reduction in battery capacity therefore have no influence. Furthermore, there is the rule that this amount is reduced by EUR 50 for each year between 2013 and the acquisition year (for example, purchase of the vehicle in 2017: EUR 500 – 4 years per EUR 50 = EUR 300/kWh).

In addition, it should be noted that the reduction is taken into account up to a maximum of EUR 10,000. In line with the reductions in the allocation of battery capacity with each year of purchase after 2013, this maximum amount will also be reduced. The reduction takes place in gradations of EUR 500 each (for example, purchase of the vehicle in 2017: maximum amount of funding EUR 7,000).

Of the gross list price reduced in this way, 1% per month is to be regarded as a financial advantage for the private use of the company electric car by the entrepreneur and thus taxable. Thus, only this last-mentioned aspect from the previous calculation regulation of conventionally driven motor vehicles is applied to the taxation of the private use of electric vehicles.

3.2 Acquisition of a pure electric vehicle in the years 2019 to 2030 (0.25% control)

Next, we consider the case of acquiring a carbon dioxide-free vehicle in the period after 31. December 2018 and before January 1, 2031, where the gross list price is a maximum of EUR 60,000. In this case, the taxable benefit from the private use of the electric vehicle is to be calculated under the 1 % scheme, but only 25 % of the gross list price is applied. Consequently, the tax on private use of electric vehicles of this type is only a quarter of the regular tax.

3.3 Purchase of an electric vehicle in 2019, 2020 and 2021 (0.5% regulation)

If the purchase of a plug-in hybrid or a pure electric car, whose gross list price is above EUR 60,000, takes place in the years 2019 to 2021, the amount of taxable private use of the vehicle must be calculated only with 0.5% of the gross list price as a tax base. This also applies to externally chargeable hybrid cars, provided they either meet the requirement to drive a distance of at least 40 km purely electric or if their CO2 emissions are a maximum of 50 g/km. In addition, as already mentioned in the introduction, pure hydrogen-powered vehicles are also tax-privileged.

3.4 Acquisition of certain electric vehicles between 2022 and 2024

Should a company purchase a pure electric vehicle with a gross list price of more than EUR 60,000 as a company car in the period 01.01.2022 and 31.12.2024, the taxation of private use is only reduced if the vehicle has at least one of two characteristics. Either it has a carbon dioxide emission not exceeding 50 g/km as determined by the WLTP standard test procedure or it can cover a distance of at least 60 km purely electrically. In this case, only half the gross list price should also be used as the basis for calculating the tax on private collection. Of course, these conditions are important in terms of acquiring the plug-in hybrid, while in general one can expect that a pure electric car of this price range naturally meets these conditions.

3.5.Purchase of certain electric vehicles between 2025 and 2030

For the following period up to 2030 inclusive, a tightening of the criteria for applying the half gross list price is planned. Companies that purchase a pure electric vehicle with a gross list price of more than EUR 60,000 or a plug-in hybrid in this period should therefore ensure that the vehicle either meets the previously existing maximum limit of 50 g/km or that the car has a purely electric range of at least 80 km, whereby these criteria are also aimed at the tax advantage of certain plug-in hybrids.

4. Determination of private collection on actual costs

As already mentioned in the introduction, the private extractions resulting from the private journeys of the entrepreneur with the electric company car can also be calculated on the basis of the actual costs. For this purpose, however, the proper use of a logbook is just as essential as the proof of the actual costs incurred with the operation of the vehicle by corresponding documents. With the help of the logbook, the total distance of the private journeys is then determined. In this way, it is possible to determine the relationship between the private use and the operational use of the company car. You then divide the actual costs in this ratio and get the percentage of the costs that are attributable to the private journeys. This is then taxable.

The tax advantage of an electrically operated company car arises from the fact that the depreciation is carried out on the basis of a more advantageous tax base. Because in this context, battery capacity plays a role. In addition, all costs in connection with the energy storage of the vehicle are taken into account. Thus, for example, rentals for the provision of the battery are also tax-advantageous.

4.1. Purchase of an electric vehicle before 01.01.2023

If a company purchases an electric car before 01.01.2023, this leads to a reduction in the tax base, with the amount of depreciation in the foreground. This is because the gross list price on the day of first registration is reduced as a basis for depreciation by an amount that depends on the battery capacity and the year of purchase. A reduction of EUR 500 per kWh of battery capacity is applied. However, the legislature has determined an eligible maximum amount of EUR 10,000. Furthermore, this maximum amount is also kept variable, because for each year between 2013 and the acquisition year, the maximum amount is reduced by EUR 500. Accordingly, the amount with which the battery capacity is included in the calculation must also be reduced. For this purpose, please refer to the two analogous examples, which we have enclosed in brackets in our explanations in section 3.1.

4.2. Acquisition of an electric vehicle in 2019, 2020 and 2021

When purchasing an electric car in 2019, 2020 and 2021, a different approach is used to reduce the tax base. In this case, one simply calculates 50% of the regular tax base for depreciation. Accordingly, the tax on the private use of electric vehicles is reduced compared to that of conventional vehicles. However, hybrid electric vehicles must meet one of two alternative requirements, namely either a CO2 emission of not more than 50 g/km or an electric driving range of 40 km.

4.3. Acquisition of a pure electric vehicle in the period 2019-2030

Taxation of private use of electric vehicles is particularly favourable if they are purchased between 2019 and 2030. Because then you only count with a quarter of the gross list price. So only a quarter of the otherwise due tax arises. However, this preferential taxation of private use of electric vehicles applies only to pure electric vehicles and only if their gross list price is a maximum of EUR 60,000. In contrast, this taxation is excluded for plug-in hybrids.

4.4 Purchase of an electric vehicle 2022, 2023 and 2024

When purchasing an electric vehicle in the years 2022 to 2024 inclusive, the gross list price reduction is only 50%. This regulation therefore applies to pure electric vehicles that have a gross list price of more than EUR 60,000. However, if the vehicle is a plug-in hybrid, then the more favorable taxation presented here can only be used if the vehicle either causes a maximum of 50 g/km of emissions or if it can drive at least 60 km purely electrically.

4.5. Purchase of an electric vehicle between 01.01.2025 and 31.12.2030

Here, too, a 50% reduction in the tax base applies if a pure electric vehicle is purchased as a new car in the remaining period until the end of 2030, whose gross list price is above EUR 60,000. If the same tax advantage is to be used instead for the private use of an operational plug-in hybrid, this vehicle must either have a carbon dioxide emission of not more than 50 g/km or be able to travel for at least 80 km by electric power alone.

Expert advice on the taxation of electric vehicles?

Private use of electric vehicles by entrepreneurs: daily trips to work

5.1. Flat-rate calculation of daily journeys to work (0.03 % regulation)

If an entrepreneur also uses his company car for daily trips to his work without keeping a driving logbook, he will be taxed by law in this respect as well. This also applies to family home trips, which are not part of the daily routes (for example, weekend home trips). In these cases, for a ‘normal’ fuel-driven car, he is credited with a monthly taxable profit of 0,03 % of his gross list price per km. Of this, the entrepreneur is deducted EUR 0.30 per km of the simple distance tax-reducing (analogous to the advertising costs of an employee).

For electric vehicles, however, this difference and thus also the applicable tax is also lower, since the respective gross list price reduced according to the procedure described in the previous chapter is relevant. In this way, there is also a tax advantage for the entrepreneur in the private use of a company electric vehicle.

5.2. Calculation of daily journeys to work based on actual costs

As an alternative to the lump-sum calculation of private removal during the entrepreneur’s daily journeys to work, the approach with the actual travel costs is used. For this purpose, proof by journey log and invoices shall be provided by analogy with the determination of private travel costs. Thus, taxes are also saved here by reducing the tax base of depreciation by an amount dependent on the battery capacity. Furthermore, the expenses associated with the battery are also deductible. In other words, there is the same savings potential for the entrepreneur as when considering private trips.

Private use of electric vehicles: Tax advantages for employees

If, in addition to the usual wage or salary payments, an employee also receives other monetary benefits from his employer (e.g. free or reduced rights of use), these benefits are usually considered taxable. However, if such benefits are related to the private use of an electric vehicle of the employer, then also here a tax consideration in favour of the employee takes place.

6.1. Taxable private use of electric vehicles by employees

The private use of a company electric car by an employee is just as tax-relevant as that of a conventional vehicle as a monetary advantage. The calculation of the monetary advantage corresponds to that which we have already described in the case of the entrepreneur as a 0.25% rule or 0.5% rule. Therefore, here too there is a clear control advantage compared to the use of a vehicle with an internal combustion engine.

6.2. Private use of electric vehicles for travel between home and workplace

In addition, all journeys of the employee between his apartment and his workplace must also be taken into account in the income tax. Either the standard 0.03% method or the journey log method, which we already explained in chapter 5, is used here. Here, too, the employee benefits from the tax benefits of the private use of an electric vehicle, which the employer makes available to him for his daily journeys to work.

6.3. Further tax advantages for private use of electric vehicles by employees

6.3.1. Tax-free electric refuelling at the employer

Furthermore, employees are even allowed to obtain electricity from their employer free of tax to charge the battery of an electric vehicle. It is irrelevant whether the electric car is a company car provided by the employer or the private car of the employee. It is also irrelevant whether the electric car is a purely electric electric vehicle or a plug-in hybrid. It is only important that the provision of the charging power is in addition to the employee’s wage or salary. Although the employer can also offer the electricity to his employee at a reduced price, even free electricity refueling is tax-free for the employee. The associated electricity costs, on the other hand, are to be recorded by the company quite regularly as an expense.

6.3.2. Accounting of electricity costs when charging the battery by the employee

Conversely, it is now necessary to assess to what extent the charging of an electric vehicle by the employee for private use by the employer is tax-relevant if the employee pays for the electricity costs. In this case, instead of the otherwise required detailed documentation, you can also choose a simpler, because blanket approach. A distinction is made between whether electric refueling is also possible at the employer. If so, then the flat fee with EUR 20 per month is lower than if the employee only pays for the charging of the electric cars himself. Because in the latter case, the monthly flat rate for the charging costs is EUR 50.

6.3.3. No tax advantage on subsidy for electricity costs by the employer

It remains to be clarified whether a subsidy for the electricity costs when charging an employee's private electric vehicle by his employer is also tax-advantageous. But in this case, the answer is quite clear that this is a very regular wage subsidy by the employer. Thus, he is fully liable to pay tax and social insurance.

6.3.4. Tax advantages for the charging infrastructure

Furthermore, the establishment of a charging station by the employer is tax-free for his employee at his home. This includes both the entire infrastructure and the installation and maintenance of the plant. Here, too, the prerequisite must be observed that this advantage is granted by the employer in addition to the regular remuneration of the employee. Of course, if the employer bears the costs, the electricity obtained from this domestic plant is tax-free for the employee.

If, however, the company’s own charging equipment is transferred to the employee, this is taxable if the purchase is made at a discounted price for the employee. However, the employer can pay off this monetary advantage with a flat rate of 25% tax.

A flat-rate taxation by the employer is also possible if he subsidizes the private purchase of such a plant by his employee.