Germany Changes 1 Percent Tax Rule On Company Cars
Germany has introduced changes to the way in which it taxes company cars that are classified for personal use. Essentially, the changes mean an extension to the current 1% rule, and they mean that any employee that has been given a company car that can be used for personal uses will be taxed according to this 1% rule. Only those employees that are not given the right to use their car for personal use will avoid the taxation. Employees are advised to keep a logbook that details when they use the car for personal driving, and when they use it for company purposes.
Germany utilises what is called the 1% rule in order to determine the taxable value of a company car. Previously, when a company car was used for personal means, a taxable value was determined by calculating 1% of the gross book list price for the car. The distance travelled in km for personal use is multiplied by 0.03% before then being multiplied by the taxable value to give the amount of tax that would need to be paid. These non-cash benefits are subject to payroll tax, solidarity surcharge, and church tax, where applicable.
Under the previous law, only employees that actually used their company car for personal mileage would be subjected to these rules, and charged taxes on the non-cash benefits. However, the new rules mean that if an employee has the right to use their car for personal use then they will be exposed to the 1% rule, even if they do not actually use the car to cover any personal miles. The employee must be strictly forbidden from using the car for personal matters, in order to be exempt from the 1% rule.
Employees that keep a logbook highlighting their exact personal and business use of their company car may be better off. The logbook must meet strict guidelines, and it should include all information relating to the personal use of the car, including the date, time, and distance that was covered. For business use, additional information, such as the person visited and the reason for the visit must also be included.
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