German Company Car Tax: Logbook (Fahrtenbuch) vs the 1% Rule — Which Is Cheaper?
If a company car in Germany may be used privately, the private benefit is taxable — and German law offers exactly two methods to value it. The '1% rule' taxes a flat 1% of the car's gross domestic list price per month as a benefit, plus 0.03% of the list price per kilometer of home–office distance per month for commuting (electric and some hybrid vehicles get reduced rates). The alternative is a driver's logbook ('Fahrtenbuch'): every trip is recorded, total car costs are split by the documented business/private ratio, and only the actual private share is taxed.
The math has a clear pattern. The 1% rule is simple but blind: it taxes the same benefit whether the driver uses the car privately every day or almost never, and it is based on the original list price — even for a used or heavily discounted car. The logbook wins when private use is low, the list price is high, or actual costs are modest: an executive driving 90% business in a €90,000 car can save thousands of euros per year over the flat rate. The price of those savings is strict German documentation standards — a logbook that fails an audit is discarded entirely and the 1% rule is applied retroactively.
International groups with German subsidiaries often default every driver to the 1% rule because it is administratively safe — and silently overpay for their field sales and executive fleet. The better approach is a per-vehicle comparison at year start, and a tamper-proof electronic logbook where the numbers favor it. What German auditors demand of such a logbook is covered in our electronic logbook checklist, and the cost of a rejected one in the fines overview.
Your checklist
- 1Run the comparison per vehicle, not per policy: calculate the 1% rule benefit (1% of gross list price × 12, plus the 0.03% commuting add-on) against a realistic logbook estimate for each car.
- 2Estimate the private-use share honestly: below roughly 20–30% private use, the logbook usually wins clearly; near 50% with an average car, the 1% rule is often simpler for the same money.
- 3Check the list-price trap: for used, discounted or long-depreciated cars the 1% rule still taxes the original gross list price — a strong argument for the logbook on such vehicles.
- 4Factor in reduced EV rates: for qualifying electric cars the flat method drops to 0.25% (or 0.5%) of the list price, which can flip the comparison back in favor of the flat rule.
- 5Decide before the year starts: the method binds per vehicle for the calendar year and can generally only be changed at year-end or when the car is replaced.
- 6Choose a tamper-proof electronic logbook if you opt for the Fahrtenbuch: spreadsheets are rejected on principle because entries can be edited without trace.
- 7Log every trip completely from day one: business trips need date, odometer readings, destination, purpose and business partner; private trips and commutes must appear too.
- 8Reassess annually and at fleet changes: new car, new home address, changed role — each shifts the comparison, so make the method check part of the yearly fleet routine.
Frequently asked questions
How does Germany's 1% rule work?
Under the 1% rule, 1% of the vehicle's gross domestic list price at first registration is added to the employee's taxable income each month for private use, plus 0.03% of the list price per kilometer of one-way home–office distance per month for commuting. The list price counts even for used or discounted cars. Qualifying electric vehicles are taxed at a reduced 0.25% or 0.5% rate.
When is a logbook cheaper than the 1% rule?
Typically when private use is low relative to total mileage, when the car's list price is high, or when actual annual costs are low — for example a largely depreciated vehicle. If the documented private share of total car costs is smaller than the flat 1%-rule benefit, the logbook saves tax. The higher the business share, the larger the saving.
Can we switch methods during the year?
Generally no. The method is chosen per vehicle and binds for the calendar year; a switch is possible at the turn of the year or when the vehicle is replaced. This makes a comparison calculation before the year starts — rather than after the tax assessment arrives — the practically relevant moment for the decision.
What happens if the tax office rejects our logbook?
The logbook is disregarded in its entirety — there is no partial acceptance — and the 1% rule is applied retroactively for the audited period. That means back payments of wage tax, income tax and VAT plus interest, per vehicle and per year. This all-or-nothing risk is why German practice strongly favors tamper-proof electronic logbooks over manual records.