Company car taxation for e-cars
9. Jan 2023
Companies are paying increasing attention to ecological factors and are increasingly replacing vehicles with internal combustion engines with low-emission alternatives. The task of fleet management is to examine the appropriateness of each mode of transport and to take into account the differences in taxation between electric cars and hybrid vehicles
The basics of company car procurement
Companies have to take many different influencing factors into account when providing company cars. The purchase price plays a major role, as do the operating and maintenance costs. Many companies want to improve their image with an environmentally friendly vehicle fleet, while at the same time subsidies and tax aspects have increased the attractiveness of low-emission vehicles. The decision made by fleet managers is therefore often between electric cars and plug-in hybrids, with the purpose of use and range being important criteria. Incidentally, of particular interest to fleet operators is the fact that purely battery-powered vehicles are already given financial preference at the time of purchase and that the German government doubled the environmental bonus for electric cars in the summer of 2020. The subsidy provides for a grant of up to 9,000 euros for new vehicles, while the integration of plug-in hybrids into the fleet is honored with up to 6,750 euros.
What actually is an electric car?
Electric cars are all vehicles that are equipped with an electric motor and do not use any additional forms of propulsion. The definition thus includes all vehicles equipped with fuel cells or fully battery-powered, and the battery power must be sufficient for a distance of at least 40 kilometers. E-rollers and e-bikes do not meet these criteria, but may be equally eligible for tax incentives.
Hybrid vehicles are not purely electric cars and are subject to different legal regulations. Tax advantages are only offered by plug-in hybrids that can be charged externally and do not belong to the category of mild hybrid vehicles. The battery power of the vehicles must be sufficient for 60 kilometers and CO² emissions must not exceed 50 grams per kilometer.
The taxation of electric cars
Environmentally friendly company cars offer high savings potential when purchasing, and all electric vehicles are exempt from vehicle tax for the first 10 years. Tax law also offers tax benefits for employees on electric cars. The monetary advantage of an electric car only has to be taxed at 0.5% from a gross list price of more than 60,000 euros, for vehicles with lower acquisition costs the e-car taxation is even reduced to 0.25%. A prerequisite for an efficient application of the reduced 1% regulation for electric cars is that the vehicles are used privately for more than 50%, with a high proportion of business trips the logbook is the ideal choice for taxing electric cars. The distance allowance is no longer taxed at 0.03% of the gross list price, but reduced to a quarter of the original amount. The method chosen has an impact on the monetary benefit of an electric car, and charging the battery in the company is generally tax-free when it comes to e-car taxation. The employer can apply a lump sum of €20 or reimburse employees who charge their vehicle at home up to €50 tax-free.
The taxation with logbook
Compared to the 1% rule, the driver's logbook for electric cars is the more complicated method, but only the kilometers actually driven are taxed. Compared to the 1% rule for electric cars, the decisive factor is therefore the purpose for which the vehicle is used. The driver's logbook for electric cars is particularly worthwhile for employees who travel long distances for business purposes, as taxes can be saved with low private use. The taxation of electric cars is also particularly attractive compared to other forms of propulsion, as only 0.075% of the gross list price per month and kilometer is applied instead of the usual 0.03%. In addition, the driver's logbook method offers a high degree of flexibility, as it is possible to switch to the 1% rule for electric cars at any time if too many private trips are made.
Taxation according to the 1% rule
The 1% regulation electric car is particularly suitable for employees who frequently use the company vehicle privately. Another criterion is an acquisition price as low as possible, since the reduction of the tax burden to the new 0.25% regulation is only possible for vehicles with a list price below 60,000 euros, while the 0.5% regulation is applied to more expensive models. The imputed income of the electric car is significantly reduced for inexpensive vehicles, so that the tax burden can be lower compared to the logbook method. Beforehand, the real costs of the reduced 1% regulation electric car should be determined exactly, since a later change to the logbook electric car is not accepted by the tax office.
The differences in the taxation of electric and hybrid vehicles
Hybrid vehicles are treated like cars with internal combustion engines for tax purposes. The motor vehicle tax is calculated according to cubic capacity and CO² emissions, but plug-in hybrids emit less carbon dioxide and are therefore cheaper than diesel or petrol vehicles. In many cases, they also benefit from the annual tax allowance that will be granted until 2024 for models with maximum CO² emissions of 95 grams per kilometer. The taxation of electric cars and hybrid vehicles differs significantly. The 0.25% rule can usually be used to calculate the monetary benefit of electric cars, while the 0.5% rule can be used for plug-in hybrids. They must have a range of 60 kilometers or emit less than 50 grams per kilometer. The hybrid logbook offers similar advantages under the same conditions, since the calculation of the distance allowance is 0.015% instead of the usual 0.03% of the gross list price. The 0.5% regulation is therefore only worthwhile if the vehicle is often used privately, while a hybrid logbook makes sense for many business trips.
Conclusion
Electric cars offer advantages over plug-in hybrids in terms of acquisition costs and enjoy higher tax benefits. The non-cash benefit is reduced to 0.25% of the gross list price for company vehicles costing less than 60,000 euros. Similarly, only a quarter of the original value must be applied to the electric car logbook when calculating the flat-rate distance allowance. The advantages of taxing electric cars are also reflected in the vehicle tax exemption, although plug-in hybrids also offer significant advantages due to the halved tax burden compared to vehicles with internal combustion engines. The regulations also offer fleet management planning security, as all tax benefits apply until at least 2030.