Increased Pricing Ceiling for Service Electric Cars
In a significant move to promote corporate e-mobility, the German government has implemented new taxation rules for company cars, effective from July 1, 2025. These changes make electric company cars more tax-advantageous compared to hybrids and conventional vehicles.
Battery Electric Vehicles (BEVs) now benefit from a reduced benefit-in-kind (BIK) tax rate of 0.25% of the gross list price for private use. This preferential treatment applies to vehicles whose gross list price, including optional extras and VAT, does not exceed €100,000. For BEVs exceeding this threshold, the BIK rate is 0.5%. These favourable rules will remain in effect until at least the end of 2030.
Plug-in Hybrid Electric Vehicles (PHEVs) are taxed at a BIK rate of 0.5%, provided they meet specific criteria such as a minimum electric range of 80 km and low CO₂ emissions.
Internal Combustion Engine (ICE) vehicles continue to be taxed at the normal BIK rate of 1% of the gross list price for private use, without these special reductions.
Additional incentives include an exemption from the vehicle tax (Kfz-Steuer) for BEVs registered by the end of 2025, valid until December 31, 2030. Employers can also apply an accelerated (degressive) depreciation method for BEVs purchased after June 30, 2025, allowing them to write off 75% of the vehicle’s acquisition cost in the first year.
The taxation of used hybrid and internal combustion engine company cars is also subject to the same rules as new ones. If the gross list price of a hybrid car or an ICE company car exceeds a certain limit, they must be taxed at a rate higher than 0.25%.
The Federal Association of Tax Assistance Associations (BVL) has highlighted the improved conditions for E-company car drivers. The improved conditions for E-company cars were implemented on July 1, 2025.
These updated rules aim to promote corporate e-mobility and provide a more sustainable and cost-effective solution for businesses. The taxation of used electric vehicles acquired on or after July 1, 2025, also falls under these favourable regulations for taxation.
The updated taxation rules for company cars effective from July 1, 2025, favor Battery Electric Vehicles (BEVs) in business and finance, as they benefit from reduced Benefit-in-Kind (BIK) tax rates, making them more tax-advantageous than hybrids and Internal Combustion Engine (ICE) vehicles. Furthermore, technology plays a crucial role in these changes, as electric vehicles (BEVs and PHEVs) are subject to specific criteria to qualify for these tax benefits, promoting the adoption of eco-friendly vehicles in the business sector.
