Germany: Company-owned electric vehicles used privately used of a company-owned electric car is subject to VAT 

The German Federal Ministry of Finance released Letter no.2022/0088874 online on Feb. 7th clarifying the VAT assessments rules for non-business (private) usage of cars and hybrid electric vehicles, as well as to the provision of employee electric bicycles and bicycles. The clarification provides:

Categorization of vehicles for VAT purposes 

Corresponding regulations are also explained for electric bicycles which are to be classified as bicycles under traffic law (no license plate, insurance or driving license requirement). 

Use of a company car for personal use is subject to VAT 

The non-business (private) use of a vehicle that is fully assigned to the business is taxable as a free transfer of value in accordance with the provisions of Section 3 (9a) No. 1 UStG. In this context, it is pointed out that the term vehicle is to be equated with the term motor vehicle and thus also includes electric bicycles that are subject to a license plate, insurance or driving license obligation. 

Use of the 1% rule for valuation 

In determining the value, the amounts determined for income tax purposes in accordance with the so-called 1% rule (Sec. 6 (1) No. 4 Sentence 2 EStG) can be used as a basis, in addition to other methods. The letter explains, among other things, principles regarding the gross list price and the input tax deduction. 

The letter also provides detailed explanation on: 

• The tax deductions that are based on private usage for tax calculation purposes 
• The procedure for determining the vehicle valuation for tax computation 

Source: bundesfinanzministerium.de

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