Last reviewed: 18 August 2026. German tax rules change often. The figures here were checked against the Einkommensteuergesetz (EStG) as in force on that date, with sources linked at the bottom. This is general information, not tax advice. Verify with your HR or payroll team or a Steuerberater before you sign anything.
Few things in a German job offer look as glamorous as the word Dienstwagen. Then you hit the fine print: “1% rule”, Bruttolistenpreis, and suddenly it’s a perk or a trap. It’s neither. It’s a math problem, and once you know the math, the question answers itself. Here’s that math, as of August 2026.
The 1% rule, translated into plain English
Cash is taxed as cash. A car needs a monthly value, and the law doesn’t track every trip; it applies a flat formula: 1% of the car’s list price, every month (Section 6 paragraph 1 no. 4 EStG defines it; Section 8 paragraph 2 sentence 2 EStG applies the same rule to employees).
The base is the Bruttolistenpreis: the list price in Germany at first registration, including VAT and special equipment, before discounts. A car listing at 35,000 EUR means a taxable benefit of 350 EUR a month, whether you drive 100 km or 3,000.
Then comes the commute. If you may use the car between home and your first place of work, the law adds 0.03% of the list price per kilometre of that distance, every month (Section 8 paragraph 2 sentence 3 EStG). Flat and monthly, whatever you actually drive. A 25 km one-way commute on that car: 0.75% of list price, another 262.50 EUR a month.
That total lands on your payslip as geldwerter Vorteil (benefit in kind), taxed like salary and subject to social insurance. Many employers flat-tax that slice at 15% under Section 40 EStG so it never lands on your payslip; the 1% part usually does.
When the logbook beats the formula
The 1% rule is a shortcut, not the only option. The Fahrtenbuch method (Section 6 paragraph 1 no. 4 sentence 3 and Section 8 paragraph 2 sentence 4 EStG) uses your car’s actual costs times your private share, as long as you keep a proper logbook and hand over every receipt.
“Proper” means complete, continuous and plausible: date, start and end mileage, destination, purpose, route. Gaps get you rejected; the tax office has seen every sloppy logbook ever invented. The logbook wins when you drive very little privately in an expensive car; if you enjoy the car on weekends, the 1% rule is cheaper and far less admin. Catch: it’s extra work for payroll, so not every company offers it.
The EV discount: 0.25% up to 100,000 EUR
Since 2019, Germany has made electric company cars cheap on purpose. For a zero-emission EV, the taxable value uses only a quarter of the list price, so 0.25% per month instead of 1% (Section 6 paragraph 1 no. 4 EStG), as long as two conditions hold: the Bruttolistenpreis is not more than 100,000 EUR, and the car was acquired after 31 December 2018 and before 1 January 2031, so every EV bought through 2030 qualifies.
The commuting top-up is based on the reduced value too: 0.03% per km on a quarter of list price is effectively 0.0075%, which is why a long EV commute gets absurdly cheap.
One cliff: the moment an EV’s gross list price crosses 100,000 EUR, the discount disappears and you pay the full 1% again. A 101,000 EUR EV costs four times the tax of a 99,000 EUR one.
Company car vs cash allowance: three worked examples
Assumptions: a blended burden of about 40% (income tax plus social insurance) for a mid-range salary. Your rate will differ. Illustrative numbers, not promises.
| Profile | Monthly taxable benefit | Approx. net cost to you at ~40% |
|---|---|---|
| Commuter: 25 km each way, car lists at 35,000 EUR | 1% 350.00 + commute 262.50 → 612.50 EUR | ≈ 245 EUR |
| City dweller: 6 km each way, same 35,000 EUR car | 1% 350.00 + commute 63.00 → 413.00 EUR | ≈ 165 EUR |
| EV driver: 20 km each way, EV lists at 55,000 EUR | 0.25% 137.50 + commute on quarter basis 82.50 → 220.00 EUR | ≈ 88 EUR |
Now the other side: suppose the employer offers 700 EUR a month gross as a cash car allowance instead. At ~40%, about 420 EUR lands in your account, and then the car is on you: leasing a comparable mid-size car runs 350 to 450 EUR a month, insurance 80 to 120, tax and maintenance 40 to 60, fuel or charging 150 to 250. Call it 650 to 850 EUR against your 420. The company car costs 165 to 245 EUR net, and the running costs belong to somebody else.
The honest caveat: if a modest used car is fine, cash can win. A solid second-hand car worth about 15,000 EUR costs maybe 250 to 300 EUR a month all-in, so a 700 EUR allowance leaves money in your pocket, at the cost of a new car, zero maintenance, and the tax discount on a high-value vehicle.
One thing nobody explains at the offer stage: the taxable benefit is usually smaller than what the car actually costs the employer, because the lease alone often beats the benefit value. That gap is the real perk, and why the cash offer runs lower than the car’s true cost.
Verdicts: a commuter with real distance should almost always take the car. A city dweller with a short commute should think hard; cash plus Deutschlandticket, car-sharing and the occasional rental can leave you richer and saner. An EV driver with workplace charging gets the cheapest configuration in Germany, so ask for that one.
Charging: what’s tax-free and what isn’t
Free charging at work is a genuine perk, and it’s tax-free. Section 3 no. 46 EStG covers charging an electric or plug-in hybrid vehicle at a fixed workplace facility and the temporary private use of a company charging device, such as a company wallbox. These benefits do not create a geldwerter Vorteil or a payslip line.
What to actually negotiate
- Ask for the number before you sign. Ask HR for the monthly taxable benefit in writing, based on the exact car you’d get. If they can’t tell you, red flag.
- Choose the car and trim yourself. Every option raises the list price, locked in at first registration for the car’s whole life.
- Ask about the EV program. The 0.25% rule turns a 55,000 EUR EV into a benefit of 137.50 EUR a month. Keep the model under 100,000 EUR list.
- Ask about charging. Is workplace charging free? Is a company wallbox available at home? What about public charging cards?
- Ask whether payroll flat-taxes the commute slice at 15% (Section 40 EStG); if so, it stays off your payslip.
- Ask for the logbook method if you’ll drive little privately; it usually isn’t offered unprompted.
- Use the cash number as the floor. The taxable value and the real cost of the car are different numbers, and you’re allowed to ask for both.
Before you sign: the fine print
The benefit is based on list price including special equipment and VAT at first registration, even if the dealer discounts heavily. It counts as income: social insurance applies, and it can nudge you into a higher bracket. The car usually ends when the job ends, and the cash allowance does too; check the notice rules in your contract. Fully remote with no assigned first place of work? No commute distance to add, so your benefit is just the 1% (or 0.25% for an EV). The EV discount has a sunset: acquisitions from 2031 no longer qualify under current law.
FAQ
What is the 1% rule for company cars in Germany?
Every month, 1% of the car’s German list price at first registration (including VAT and options) is added to your salary as a taxable benefit, plus 0.03% of the list price per kilometre of your home-to-work distance if you may use the car for commuting (Sections 6(1) no. 4 and 8(2) EStG).
Is a car allowance taxable?
Yes. A cash car allowance is ordinary wage income (Section 19 EStG), taxed and subject to social contributions like salary.
What is the 0.25% rule for electric company cars?
For zero-emission EVs acquired from 2019 through 2030 with a gross list price up to 100,000 EUR, only a quarter of the list price is used, so the taxable benefit is 0.25% per month instead of 1% (Section 6(1) no. 4 EStG).
Can I use a logbook instead of the 1% rule as an employee?
Yes, if your employer agrees. You document every trip and all costs, and the taxable benefit is your actual costs times your private-use share (Sections 6(1) no. 4 and 8(2) sentence 4 EStG). It pays off only when your private mileage is low.
General information, not tax advice. Everything here was checked on 18 August 2026; confirm the current rules with your HR or a German tax adviser.
Sources
- EStG Section 6(1) no. 4 (1% rule, 0.25% EV rate with the 100,000 EUR cap, logbook method): https://www.gesetze-im-internet.de/estg/__6.html
- EStG Section 8 (benefit valuation, 0.03% commuting top-up, employee logbook option): https://www.gesetze-im-internet.de/estg/__8.html
- EStG Section 3 no. 46 (tax-free workplace charging and company charging devices): https://www.gesetze-im-internet.de/estg/__3.html
- EStG Section 40(2) (15% flat tax on commuting benefits): https://www.gesetze-im-internet.de/estg/__40.html
Update log
- 2026-08-18: Draft. Rates verified against the EStG in force on this date: 1% rule, 0.25% EV rate (up to 100,000 EUR, 2019-2030 acquisitions), 0.03% per km top-up, 15% flat-tax option, tax-free workplace charging (Section 3 no. 46). Examples use an illustrative 40% burden.
Related reading: how to find a job in Germany, the health insurance guide, and the first-year costs reality check.
