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Company car tax 35 % remuneration in kind

There comes a moment you need a company car. Need in the sense of you either think you performed well, hence you give yourself a present. Or need in the sense that you no longer want to travel with public transport day in day out. Luxury comes with a price and if the company car is a necessity, the price is the same.

Company car and remuneration in kind

A company car implies that you have a remuneration in kind. To set a value at such a remuneration we have several percentages that needs to be added to the income over the Dutch new catalogue value.  The tax base can be 7%, 14%, 25%. The low percentages over economic friendly vehicles and 25% over the cars that are actually fun.

How expensive can it be?

You might have the opinion that an Audi TT is fun. No idea what such a car costs, but let us assume EUR 70.000. Then 25% over EUR 70.000 is added to your income, being EUR 17.500. And you need to pay the purchase price or the lease price for this car which is also not the cheapest. Conclusion, you need to think twice before you give yourself something nice.

Can this be done differently?

Company car and 35

15 year old company car tax 35 %

35% sounds more than 25%, but it is the base you need to take into account. The 25% is levied over the new catalogue value. The 35% is levied over the economic value of the car at that moment, under the condition the car is at least 15 years old. Not all cars are suitable for this purpose, you see in the daily traffic exactly which cars of that age have disappeared.

One of our clients purchased a 15 year old E class Mercedes for little money and he is finding it a joy to drive. Not only does he need to add 35% over EUR 4.000 to his income, being EUR 1.400, but the car was serviced from the start with the Mercedes dealer. A good car with maybe 15 year old outdated gadgets. If you take into account that Mercedes is the leader in gadgets, these 15 year old gadgets might even not be yet in younger cars.

Service costs, tire costs, petrol costs combined will exceed the EUR 1.400 easily during the year, so actually he is making the company car a cost deduction, instead of an addition to the income.

How long is the car a company car?

If you are self employed and you have a company car, this company car remains a company car as long as it was registered in your name. That is something to take into account. If you decide to sell the car to yourself out of the company, then with a BV company the car is actually transferred into your name. A private proprietor company is already in your name, so the transfer of the car out of the books does not imply the name of the holder is changed.  When the name of the holder has not changed, nothing has changed from a tax point of view. That implies you still need to add the percentage to your income.

In order to stop the percentage being added to your income as sole proprietor entrepreneur, you actually need to take the car outside your assets. If you are married and your assets are strictly divided, you can sell the car to your wife. In most marriages in the Netherlands that is not the case, so you need to transfer the car outside the marriage. After a period of about three months you can transfer the car back in to your name. Assuming you like to keep the car. This registration issue is an important point not to miss out on, as it can become expensive tax wise.

What if you have no company car costs as sole proprietor?

You do have a company car, at any given percentage as remuneration in kind, what if the car costs do not exceed the remuneration in kind?

An example: You can drive a 5 year old Mercedes S500, for which you need to add 25% over EUR 200.000 being EUR 50.000 to your income. If you have only EUR 10.000 depreciation costs and EUR 10.000 running costs, your costs are EUR 20.000. This would imply you are making a profit on the car of EUR 30.000. That was not the intention of the legislation. Therefore the amount added to the income will be reduced to the total amount of the company car costs. Your profit and loss account shows nil on the company car costs. What is then the purpose of having a company car? A liquidity advantage as the company is paying for the costs.

Orange Tax Service

We can assist you with the tax implications on a company car. Contact us.

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