In the discussion about the taxation of company cars that took place over the summer, the Federal Ministry of Finance opposed all calls to tighten the previous flat-rate regulation and thus make driving company cars more expensive.

The Ministry of Finance thus denies any need for changes to the previous tax flat rate.

Tobias Piller

Editor in Business.

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Among others, the chairman of the Greens, Omid Nouripour, had demanded a contribution from the drivers of company cars for the financing of successor models to the 9-euro ticket.

"A reform of the company car privilege is overdue," he said.

Criticism and doubts about the flat-rate taxation of company cars have been expressed by many personalities in the past few days, especially from the green and left camp.

The President of the Federal Environment Agency, Dirk Messner, described the regulation as a climate-damaging subsidy.

Economic wise man Veronika Grimm has also spoken out in favor of ending the benefits of company car taxation.

“Appropriate Taxation”

On the other hand, the Federal Ministry of Finance commented on the discussion to the FAZ with the statement: "The company car taxation is not a subsidy." The previous regulation represents an "appropriate taxation of private use". It leads to a similar tax burden as it would also result from the use of a logbook.

Because the drivers of company cars are always free to keep a logbook with business trips and private trips with the company car - which are later taxed as private use.

The Federal Ministry of Finance concludes that an increase in the flat rate for the private use of company cars would not bring any additional tax revenue: "Rather, taxpayers would immediately switch to using a logbook, which is just as permissible,

A subsidy for company cars is only available for the operation of purely electric or plug-in vehicles with a combustion engine and battery drive.

For the plug-in cars, the flat rate for the private use of company cars is halved, the drivers of purely electrically powered company cars only have to enter a quarter of the usual flat rate in the tax return for private use.

From the point of view of the Federal Ministry of Finance, only this favoring of electric drives among company cars is a subsidy, the costs of which are currently estimated at 900 million euros a year.

Complex debate about the term “privilege”

For cars with traditional combustion engines, the taxable flat rate for private use has so far been one percent of the gross list price plus 0.03 percent of the list price for each kilometer of distance between home and work.

If you live 22 kilometers from your workplace, you have to pay tax on around 20 percent of the car's value as income every year, and the entire list price in five years.

The usual – formerly quite large – discounts for the purchase of company cars are not passed on to the company car driver.

Flat-rate taxation continued even during lockdown times when little was driven.

On the other hand, company car drivers are little affected by rising fuel prices.

For employers, the company car regulation is not only of interest because of the administrative simplifications - they treat these cars as company cars, get the VAT back and deduct the rest as company costs.

At the same time, they do not have to pay any social security contributions for this salary component (up to 20 percent of the salary as an employer contribution).

Individual studies have recently added the advantages for the employer to the alleged advantages for the employee and then evaluated this sum as evidence of privileges.

It is also sometimes neglected that employees without a company car are allowed to deduct up to 38 cents per kilometer from their taxes.

The trade associations don't even want to use the word "privilege" and resist the allegations of preferential treatment.

According to the Association of the German Motor Trade (ZDK), "a work tool is unjustly discredited as a subsidized luxury item for top earners".

12 percent of the employees, especially from the field service, have a company car, the most common brand by far is Volkswagen.

Thanks to the incentives for electric cars, climate protection is already taken into account today.

What is the most popular model?

The Association of the German Automotive Industry (VDA) reports that in 2021 company cars accounted for 37.3% of new registrations;

a total of 980,000 cars.

The most used company car is the VW Golf.

Among the electric cars, the share of company cars is 42.2 percent.

"Company cars are a very important driver for having modern, safe and clean cars on the streets," argues VDA Chairwoman Hildegard Müller.

With the current rules, it is attractive for companies and employees to regularly order new cars.

From the point of view of the VDA President, this means that clean and electrically powered cars can be on the road faster.

The fact that German companies prefer German car groups and their (sometimes also foreign) brands to foreign products when selecting their vehicle fleet is also important for German car manufacturers.

While in general German companies account for 68 percent of new registrations on the domestic market, it was 82 percent for company cars.

Without the current regulation, the VDA believes that there would be more old and more foreign cars on German roads.