Tax incentives for electric cars

Sustainable mobility Tax incentives for electric cars

The Federal Government wants to see more electric cars on Germany’s roads. It plans to make buying electric vehicles even more attractive in tax terms and has now laid the legislative groundwork for new tax incentives.

An electric car at a charging station

Tax benefits for charging electric vehicles are to be extended

Photo: Bundesregierung/Tybussek

The Federal Government is creating further tax measures to foster electromobility. On Wednesday the Federal Cabinet adopted a draft bill which includes new tax incentives to promote e-mobility.

Making electric company cars more attractive

The draft legislation contains the following regulations, among others, which are aimed at encouraging eco-friendly mobility.

Delivery vehicles: A special tax depreciation allowance of 50 per cent in the year of purchase will be introduced for fully electric delivery vehicles – in addition to the standard depreciation allowance. It will apply from 2020 to the end of 2030.

Company cars: The basis of assessment for the use of electric or plug-in hybrid company cars for private purposes was halved as of 1 January 2019. This tax break initially applied until the end of 2021 and will now be extended to the end of 2030.

Charging stations: Charging an electric or hybrid electric vehicle on an employer’s premises is currently tax exempt up until the end of 2020. The same goes when a company charging station is periodically used for private purposes. This tax benefit is to be extended to the end of 2030.

Job tickets and company bikes still tax free

Another element in the strategy to promote environmentally friendly mobility are the following incentives to promote the use of public transport and bicycles:

Job tickets: Since the beginning of this year job tickets have been tax exempt, although they are set off against the commuting allowance. In future, a job ticket can be subject to a 25 per cent flat rate of tax, in which case it will not be set off against the commuting allowance.

Bicycles: As from 2019 company bicycles are tax free. This tax exemption initially applied to both electric and traditional bicycles until the end of 2021. This period is being extended to the end of 2030.

As well as introducing other tax breaks, the necessary legal changes will be made to tax law, including adapting it to comply with EU legislation and established European Court of Justice decisions.

Entry into force: Unless explicitly stated otherwise, all the above rules will enter into force on the day after the new law is promulgated. The law is set to be passed by the end of this year.