A company car at the start of your career looks like a bonus at first glance, but for tax purposes it is part of your pay. If you also use the car privately, your employer must count a benefit in kind (geldwerter Vorteil). In most cases this is calculated with the one-percent rule, and electric cars follow their own rates. This guide explains the rule with a worked example and shows what to check in an offer.
Short answer: For private use of a company car, one percent of the German gross list price is counted as a monthly benefit, plus 0.03 percent of the list price for each kilometre between home and work. Pure electric cars are valued at one quarter of this rate under section 6 EStG if the conditions are met. Last updated: October 2026.
The most important points
- Private use of a company car counts as a benefit in kind and increases your taxable income.
- The one-percent rule adds 1 percent of the gross list price per month, plus 0.03 percent for each kilometre of commute.
- Pure electric cars are valued at 0.25 percent of the gross list price if the conditions are met.
- A mileage log (Fahrtenbuch) can replace the flat rate, but it requires complete records.
- The benefit also affects your social security contributions, so include the company car in every salary comparison.
What is a benefit in kind for a company car?
If your employer provides a vehicle for private trips too, this is an advantage you do not receive in cash. The tax office treats it like earnings. Your employer adds it to your payslip every month. Payroll tax is then calculated on the total, so your net salary falls even if your gross salary stays the same.
The benefit also increases the basis for social security contributions. For health insurance, employees pay half of the total rate. The reference figures are published each year by the GKV-Spitzenverband, the umbrella organisation of statutory health insurers.
How does the one-percent rule work?
The rule is a simplification. It replaces recording each private trip with a fixed flat rate. The basis is the German gross list price of the vehicle including special equipment and VAT, not the price you actually paid.
| Component | Rate | Basis |
|---|---|---|
| Monthly basic amount | 1 percent | Gross list price |
| Commute | 0.03 percent per kilometre of distance | Gross list price |
| Alternative with mileage log | Share of actual costs for private trips | Complete mileage log |
Assumption: list price 35,000 euros, commute 20 kilometres, petrol car. The basic amount is 350 euros per month. The commute adds 0.03 percent times 35,000 euros times 20 kilometres, which is 210 euros. That gives 560 euros per month and 6,720 euros per year. Using the employee share of health insurance of 8.75 percent (14.6 percent plus an average additional contribution of 2.9 percent, halved), this means roughly 49 euros per month, calculated for health insurance only.
What changes for electric cars?
For pure electric vehicles, section 6 (1) no. 4 EStG provides a quarter rate. The benefit is then 0.25 percent of the gross list price per month. Conditions include that the vehicle has no CO2 emissions per kilometre driven and that the gross list price is no more than 100,000 euros. The purchase must have taken place after 31 December 2018 and before 1 January 2031. Check the current legal text on gesetze-im-internet.de if needed.
With a list price of 45,000 euros the basic amount is 112.50 euros per month. Commuting in electric cars follows its own rules. Clarify this with your employer or a tax adviser before you sign the contract. Compare this with the rules on taxes for students (in German).
When is a mileage log worthwhile?
Instead of the flat rate, you can count the actual costs of the vehicle in proportion to private trips. This requires a complete mileage log with date, odometer reading, route, purpose and number of trips. It is mainly worthwhile if you drive little privately or the car is expensive. Whether it is cheaper for you depends on mileage, costs and the effort involved.
What changes in your tax return?
If your employer provides a vehicle and records the commute as a benefit in kind, you cannot also claim the commuter allowance for these trips. Double counting is not allowed. This matters if you read the guide Commuter allowance 2026 for first-time employees and drive your own car.
Business trips follow their own rules. Record them cleanly anyway, because they are settled separately from the commute. This keeps your tax return traceable.
Which questions should you clarify in the interview?
- Is the gross list price stated, and which special equipment is included?
- Who pays insurance, maintenance, tyres and fuel or charging electricity?
- Is private use restricted, for example for trips abroad?
- What happens in case of an accident, a breakdown or a change of employer?
What does this mean for your career start?
A company car is one part of the overall package. What matters is what you end up with in net pay and in the form of a car. Compare salary and vehicle together, not separately. Check whether the employer covers insurance, maintenance, fuel or charging costs and how private use is regulated.
- Ask for the gross list price including special equipment in writing.
- Note your commute in kilometres.
- Calculate the monthly benefit using the one-percent rule or the quarter rate for electric cars.
- Get the usage rules in writing: private use, costs, insurance and handling of outages.
- Compare the result with your gross salary and social security contributions.
Frequently asked questions
Does a company car increase my social security contributions?
The benefit in kind is generally part of the contribution-liable earnings. This means contributions to health, long-term care and pension insurance usually rise accordingly. The extent depends on your income and the contribution ceiling.
Do I have to keep a mileage log?
No. The one-percent rule is the standard case and needs no log. You can voluntarily choose the mileage log if it is cheaper for you.
What happens if I do not use the car during holidays?
The flat rate is applied monthly, including months with holidays. Whether the employer treats longer periods of non-use differently should be set out in the usage rules.
Can I refuse a company car?
Whether a company car is part of your contract depends only on the agreement. If you decline it, your salary stays unchanged if this has been agreed. Settle what applies in writing beforehand.
Does the one-percent rule also apply to a leased company car?
Yes. Whether the employer leases or buys the vehicle does not change the valuation. The gross list price of the vehicle remains decisive. Ask which list price the calculation is based on, because it is not always identical to the leasing offer.
What to do next
- Get the gross list price and the usage rules in writing.
- Calculate the benefit for your commute.
- Compare the company car and salary using the net result, not the gross amount.
- Clarify electric car rules and special cases with your employer or a tax adviser.
- Document all agreements before you sign the contract.
Related guides
- Part-Time Jobs and Taxes for Students in Germany
- Moving for your first job
- Commuter allowance 2026 for first-time employees
Sources: section 6 EStG, valuation of benefits in kind (as of October 2026), GKV-Spitzenverband, reference figures for contribution law (as of January 2026)
Last updated: October 2026. This guide is general information, not individual advice.
