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Company cars while working from home – Employees are able to reduce their taxable usage benefit

When employees also use company cars for private purposes, normally, they have to pay tax every month on a lump sum of 1% of the gross list price of the motor vehicle. If the car is used for journeys between the home and the primary workplace then for each kilometre of the distance between the home and the primary workplace another 0.03% of the list price is added to the taxable amount. The coronavirus crisis has now opened up possible paths to a reduction.

Use of company car for journeys between the home/workplace

In times of the coronavirus pandemic, in particular, for a number of employees there has been a severe reduction in company car use for professional reasons due to having frequently worked from home. The flat-rate taxation of journeys between the home and the workplace could be disadvantageous on account of there having been fewer journeys to the primary workplace. There is thus the possibility of retroactively reducing the usage benefit because the flat-rate 0.03% benefit is based on the assumption that the journeys to the primary work-place take place on 180 days in a year.  

Providing proof

If an employee provides the local tax office with documentary evidence that s/he had made fewer journeys then s/he could obtain a more favourable individual assessment for the journeys; this would be based on 0.02% of the list price for each kilometre of distance so that the excess payroll taxes that have been withheld would be reimbursed via the income tax assessment notice. The documentary evidence that should be maintained in order to obtain a reduction in the usage benefit should show the days on which the employee had actually used the company car for journeys to the primary workplace (e.g., by submitting appointment schedules or working time records). Furthermore, the employee has to credibly 
demonstrate how the employer had taxed the benefit to date by providing a salary statement or a certifying statement from the employer.

Example of how to calculate the tax reduction

The employee drives his company car (gross list price of € 50,000) to his primary workplace(distance: 48 kilometres) on 64 days in the year. This gives rise to the following usage benefit:

  • According to the 0.03% method: 0.03% x 50,000 € x 48 km x 12 months = € 8,640 
  • According to the 0.02% method: 0.002% x 50,000 € x 48 km x 64 journeys = € 3,072
  • Reduction in the benefit: € 8,640 – € 3,072 = € 5,568.00

If a marginal tax rate of 30% is assumed this therefore results in a tax reduction of € 1,670.40. 

Recommendation: Those who provide a record of a reduced number of journeys to the company for the taxation of usage would, however, also have to use this as a basis for the distance-related tax allowance so that the deduction of work-related costs would decrease. 

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