A company car is one of the most discussed topics between an entrepreneur and his or her tax advisor. Bottom line is to have a high expensive car on the company and drive it privately.
Company car – tennis instructor
Apparently becoming a tennis teacher involves a company car, not one but three. In this case it was actually a school teacher (sports) who became an entrepreneur on the side. He rented tennis courts and to commute to the courts he drove an Alfa Romeo, Audi and Porsche.
For the year 2014 the tax office did an audit with his company. It is standard that a percentage of the Dutch catalogue value of the car is to be added to your income for the private use of the company car. I can only assume 25% for the concerning cars. The tennis instructor had not done any of that.
When you drive a company car and no amount is added to the income for private us, this is possible if you provide to the tax office a KM administration showing that with all the cars you have not driven more than 500km per year for private use. For the Alfa Romeo and the Audi he had not done that either.
The tennis instructor accepted the tax for the Alfa Romeo and the Audi. For me that is a surprise, as the tax office will not charge the tennis instructor for only the year of the audit, but for a 5 year period. The fact that he did not complain could be initiated by the fact that these cars are older than 15 year old and then 25% over the day value of the car is added to the income. Which can be almost nil.
Company car – Porsche
The Porsche was a different story. That was a company car for which the tennis instructor had kept a KM administration, but neglected to provide that to the Dutch tax office. Upon receipt by the Dutch tax office they noticed that the distance from his home to the tennis courts were always exactly 39 KM over the past years. That is strange, as sometimes it could be 38KM or 40KM according to the court.
Moreover, part of the KM administration is that the starting KM number of the car is mentioned at the start of the line, then the KM driven, plus the reason ending at the total KM driven by the car at the end of the line. In 2012 a mistake was made in the total KM administration of the car, which kept on going till the end of the year 2014. That also indicates that the KM administration was only made after the audit of the tax office was done. Such a fabricated KM administration is dismissed by the court. Conclusion, the tennis instructor is due a substantial amount of income tax for the private use of the Porsche company car.
What surprised me the most in the above mentioned court case, is the fact that the number of cars was not under discussion. Why would the business of a one man company without employees require three company cars? Such a discussion was done in court for a very well-known Dutch lawyer who drove a yellow Lamborghini for a two week period and then changed it for another exotic car. The court asked why he only drove it for two weeks. He responded that he did not like the color yellow. But the color is not of importance for the court, it is the function of the car for the company. Did the car function for the company and in that case the lawyer could not proof it had any function for the company. Can a tennis instructor have made a case that he needed three cars for his company that was not his main source of income? I doubt that.
With the company car the fiscal advise is often very simple, if you cannot afford to drive it, do not drive it. Seldom this advice is accepted by the client.