Extension of Tax Benefits for Electric Vehicles as Company Cars

In the course of the second German Coronavirus Tax Relief Act, the legislator has increased the maximum amount of the gross list price up to which a preferential taxation of private use of fully electric vehicles is applicable from EUR 40,000 to EUR 60,000.

Under the previous statutory regulation in section 6 of the German Income Tax Act (EStG), a quarter of the gross list price was to be used for the taxation of the private use of fully electric vehicles acquired by the end of 2030 only if this price amounts to EUR 40,000 at most. This upper limit is now increased to a gross list price of EUR 60.000 (section 6 (1) no. 4 sentence 2 no. 3 EStG).

With respect to the flat-rate wage/income tax on the private use of electric vehicles, this means that now also vehicles with a gross list price of up to a maximum of EUR 60,000.00 fall within the scope of the quartering of the assessment basis. If the gross list price exceeds EUR 60,000.00, a tax relief for half of the gross list price remains. Still, only fully electric vehicles that do not produce any carbon dioxide emissions at all are eligible for this type of tax benefit.

In detail, this means that taxpayers with profit income as well as employees have to pay tax on a monthly monetary benefit of only EUR 150 for an EV with a gross list price of EUR 60,000. Previously, because the maximum limit was exceeded, it would have been possible only to consider half of the gross list price, so that a monetary benefit of EUR 300 would have been subject to taxation.

In combination with the reduction of the VAT rate to 16 percent, there is additional potential for benefits for first-time registrations between 1 July 2020 and 31 December 2020. Since the gross list price at the time of first registration is to be used as a basis, the extended regulation applies to EVs with a net list price of up to EUR 51,724.00; with a VAT rate of 19 percent, the net list price at the time of first registration may only be EUR 50,420.00.

Irrespective of whether the vehicle is an electric vehicle or any other vehicle, all taxpayers who receive a vehicle ‑ with first registration in the period from July 2020 to December 2020 ‑ also for private use will benefit from the reduction in the VAT rate and the reduced gross list prices. Since the gross list price at the time of first registration is regularly used as a basis, the corresponding assessment basis for the flat-rate wage/income tax will be reduced by around 2.5 percent.

Daniel Hermes