Germany: Regulations on private car use and electric vehicle reimbursements

New regulations and legal clarifications in Germany affect how employees handle vehicle usage and expenses for work.

Regarding private vehicle use, employers cannot unilaterally mandate that employees use their own cars for business trips. Such a requirement must be explicitly agreed upon in an employment contract or supplementary agreement, as employers are generally responsible for providing necessary work equipment. If an employee voluntarily uses their private car for business interests, specific terms regarding mileage reimbursement, insurance coverage, and liability in the event of an accident should be clarified beforehand.

For employees using company-provided electric or plug-in hybrid vehicles, new rules effective since January 1, 2026, govern the reimbursement of privately incurred electricity costs. Employers can reimburse these costs tax-free as expense reimbursements, whether the charging occurs at home or at a public station. However, the previous method of using flat-rate allowances for home charging is no longer permitted. Employees must now document the amount of electricity used and multiply it by the price per kWh, often using their individual electricity contract rates, to ensure accurate reimbursement.