Vehicle tax (Kfz-Steuer)

1. How the tax is calculated

The tax has two components added together. The first is based on engine capacity, charged per 100 cm³ or part thereof, at a higher rate for diesel than for petrol. The second is a CO₂ surcharge applied to emissions above a threshold, on a rising scale so that higher-emitting vehicles pay disproportionately more.

The diesel differential is the part that catches buyers. A diesel costs more in tax every year, and its advantage lies in fuel consumption, so it only comes out ahead above a certain annual mileage. For a low-mileage driver a diesel is usually the more expensive choice overall.

• A per-100 cm³ charge on engine capacity, higher for diesel than petrol
• A CO₂ surcharge on emissions above a threshold, on a rising scale
• Motorcycles are taxed on capacity alone
• Electric vehicles are exempt for a period from first registration
• Vehicles for people with certain disabilities can be exempt or reduced
• Historic vehicles with an H registration pay a flat rate

2. How it is paid

Vehicle tax is administered by customs rather than by the tax office, which surprises people. Registration data flows automatically from the registration office to customs, and you receive an assessment without applying for anything.

Collection is by SEPA direct debit only. There is genuinely no option to pay by transfer or card, which is why a signed mandate is one of the documents you must bring to register a vehicle.

It is billed annually in advance from the date of registration, so the tax year runs from your registration anniversary rather than from January.

3. Changes, refunds and non-payment

The tax liability follows the registration. Deregister the vehicle and the liability stops from that date, with the unused portion of the prepaid year refunded automatically.

That is why deregistering promptly when you sell or scrap a car matters financially as well as administratively: while the vehicle remains registered to you, the tax keeps running whether or not you have the car.

Non-payment has an unusually direct consequence. Customs can ask the registration office to force the vehicle off the road, and the office will deregister it, which is a considerably faster escalation than most tax debts produce.

• Deregistration stops the liability from that date, with an automatic pro-rata refund
• A change of keeper transfers the liability to the new keeper from the transfer date
• Moving house: notify the registration office, and the tax record follows
• Changing your bank account: notify customs, as a failed direct debit escalates quickly
• Persistent non-payment can result in the vehicle being forcibly deregistered

4. Vehicle tax in context

Vehicle tax is usually one of the smaller items in the annual cost of running a car in Germany, and focusing on it alone leads to poor decisions. Insurance, fuel, the biennial inspection and depreciation all typically cost more.

The useful way to use the tax figure is as one input into a total annual cost comparison between two specific vehicles, alongside the insurance classification and realistic fuel consumption.

• Insurance, which varies by model classification and your no-claims class
• Fuel, the largest variable and the one most sensitive to your mileage
• Vehicle tax, annually in advance
• The HU inspection every two years, plus any work needed to pass
• Servicing and wear items: tyres, brakes, oil
• Depreciation, which for a newer car is the largest cost of all
• Parking, which in city centres can exceed all of the above