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Company vehicle without private use value added to the income

The company vehicle is a popular topic. Experienced has learned that you can be very inventive, in the end the car will cost you money.

The company vehicle and private use

The employer can make available for the employee an vehicle. That vehicle is meant to be used for business purposes. However, if the vehicle is taken home, that is not business but private use.

The moment the employer pays for private costs of the employee, that is regarded net salary. To make the private reimbursement workable, a percentage of the new Dutch catalogue value of the company car is added to the income of the employee.

Example private use calculation

Employee drives EUR 17.000 Peugeot, then 22% of the EUR 17.000 is added to the income, being EUR 3.740. An employee that drives a company Peugeot of EUR 17.000 is probably in the 38% tax bracket. 38% of EUR 3.740 is EUR 1.421. The company car costs the employee in net salary per months EUR 1.421 parted by twelve months is EUR 118 per month. For EUR 118 per month this employee can drive the Peugeot to the South of France and the employer can reimburses all the car costs.

This percentage of private use method is fair. The executive employee that opted for the Porsche 911 with a value of EUR 250.000 also gets added to the income 22% over EUR 250.000. This employee is probably in the 49,5% tax bracket, hence the car is slightly more expensive for this employee.

How to avoid the amount added to the income?

The percentage to the income can be avoided by not using the company vehicle for private purposes. The truckdriver who takes the truck home, as that is convenient to start again Monday morning, will not visit his mother inlaw with the truck during the weekend. Hence no value is added to the income.

Some employees claim they only use the company car a few kilometers per year for private use.

Small amount of KM private use

The Dutch tax office agreed that is the company car is used for less than 500 km per year for private purposes no 22% of the Dutch catalogue value is added to the income.

This triggers the Porsche 911 executive employee. Everything he does is business.  As thought the director of the energy company.

Company car without private use value added to the income
Company car without private use value added to the income

Court case – company car private use value director of energy company

The director of the energy company drove a company car and claimed to drive less than 500 km per year for private purposes. Hence he completed the statement provided by the Dutch tax office that the car is not used for private purpose.

How do you proof you do not drive more than 500km per year for private purposes? Indeed, with a clever small device you can have build in the company car. It monitors what you drive and you can then indicate if that is private or business kilometers.

The Dutch tax office audited the director of the energy company books and they adjusted the 2017 and 2018 payroll. Added was value of the company car for private use to the income of the director.

The director went to court

The director disagreed and showed an overview of the kilometers driven. Clearly this was an overview made to fight the claim as it was randomly set up. Every day the same distance home work was included, but then he forgot that certain public holidays like Easter fall party on a weekday as well.

The court asked about him working on a public holiday and the excuse was that everything he does is business and as they sponsor a soccer club, he as director was supposed to be present. That is work, hence the kilometers. The total of the kilometers driven of the car did not match the kilometer the maintenance company of the company car put on the invoice. The court dismissed the appeal.

The director went to the high court and the high court also dismissed the appeal. The high court stated that this was clearly a fabricated kilometer overview created years after the events. Neither did they believe the director worked during Christmas and Easter in the office.

The director countered that his employer has never informed him well enough about the obligations. That plead was dismissed by the high court as well, as the statement he completed for not using the car for private purposes was very clear and specific in the responsibility in that matter of the driver of the vehicle.

Tax is exciting

We think tax is exciting. Cars can excite us as well. Like the American say “ Do not play with dogs you cannot run with”. If you can actually not afford the car you drive, then do not drive such a car.

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