In another article on this blog you can read about the fiscal consequence of having a company car. For employees that are convinced the car is only used for business, no private use, these employees can apply for being exempted from paying tax over the use of the company car.
Company car with no value added to your income
If you drive less than 500 km per year for private use, you do not need to pay any tax for the use of the company car. This 500 km max use you have to proof with a KM administration. This administration is heavy burden on the employee as the tax office will look into the administration very precisely.
In the past you only need to make sure that your speeding tickets matches with the place you drove in your KM administration, but the tax office has stepped up. You might have notices on the Dutch highway the camera’s at the border, amusement parks, IKEA and any given road. Those are tax office camera’s that store the license plate details in orderly manner. This information is used to see if your KM administration does indeed reflect reality.
Reality can be hard, that is what a lot of employees with a company car have learned. A lot of KM administrations do not match, or exceed the 500 km per year. The result is that the tax office is claiming with these employees the tax they should have paid for the car. This amount is increased with a penalty that goes up from 25% to 100% depending on the fraud the tax office sees in the actions of the employee.
Most recent example was the employee with a smart phone that had a program that automatically processed the KM administration. He had done so with this one phone for the years 2008, 2009 and 2010. Unfortunately the smart phone broke down, was send for repairs and returned with a cleaned memory, hence all the data of the KM administration was gone. The tax office had no compassion. The court had a little compassion, the court reduced the 25% penalty to a 5% penalty.
Bottom line, if you can afford the tax related to the company car, look for an alternative, but not the KM administration.