The company car incorrectly processed

Difference employment versus self-employed: disability insurance

The company car is by far the most advised aspect of a company. One way or the other, a car costs money.

The company car

A company car is a benefit the employer makes available for the employee. The car is used for work, but is also used for private purposes. As that is a remuneration in kind, a percentage of the new Dutch catalogue value is added to the income of the employee.

The company Porsche without a remuneration in kind

Is that possible? Is that not too beautiful to be true? The too beautiful to be true phrase should become a mantra in Dutch taxation, as that solves many questions we receive.

This time a shareholder director of a BV company awarded himself with a Porsche Panamera leased by the BV. His wife, who did some work on the side for the BV, was driving a Mini Cooper leased by the BV.

The couple did not add the compulsory percentage to the income for private use. They paid the costs of the company cars themselves to the company. The couple did not see the cars as company car.

The tax office had a different vision.

Gomes company Mercedes

The company car – court case

The Dutch tax office imposed the applicable percentage to the income plus 40% penalty for misbehavior. The couple appealed  based on the fact they fully paid for the costs. The BV did not bear any costs.

The tax office was not shown a document from which it was made clear the payments the couple made was voluntary or compulsory. In other words, the payments could have been for the cars. Could have been for something else. The BV had no legal means to claim payments from them related to the company car.

That made the payments irrelevant for the procedure.

The court ruled that the tax office was correct in its assessment and penalty.

The company car – what is best

A note about the most asked question. If you compare a company car versus purchasing a car privately, compare apples with apples. Not put in a lemon in the comparison. That implies you need to go through the full procedure with the company car from the purchase to and including the sale to yourself at the end of the period the company car is used for the company.

Then you learn that the difference is marginal, the obligations that come with the company car procedures are very much open to debate about values.

If you want a car for yourself, purchase one yourself. If the company needs transport, purchase company transport.

Do not try to see what is best for your wallet, not even tax wise, the best. Neither is, and that is coming from a petrol head!

Tax is exciting

Tax is exciting. Driving a Porsche paid by the company is maybe even more exciting. Myself I prefer the Mercedes make, hence the picture.

We do disagree with the couple. If the couple states the cars did not cost the company any burden, why not lease the cars privately directly? Indeed, on personal title the couple probably did not have enough loan capacity to obtain the lease contracts. The BV did apparently have the loan capacity. The BV did bring them an advantage.

Anything gained in this employee relation is subject to tax. Anything gained in the shareholder relation is subject to dividend withholding tax.

Help my employer having me drive a non-Dutch license plated car

Help my employer having me drive a non-Dutch license plated car, is that a problem?

Driving a non-Dutch license plated car

The rule in the Netherlands is that you cannot drive a non-Dutch license plated car if you are a Dutch tax resident. It is a very rigid rule in the sense that you can be stopped by the police, but often the customs, and asked to pay the tax we impose on the car instantly. And the ‘you’ is the person driving. It could be your mother in-law who borrowed your foreign license plated car. Then she is to pay the tax on your car. So whoever is caught is to cough up the tax. That is what we refer to as rigid.

Driving a non-Dutch license plated car is therefore a problem.

Why a non-Dutch license plated car?

Why would an employer do that, is the first question. The employer can be situated abroad and you work for them in the Netherlands. A foreign employer cannot lease with a Dutch lease company a car when the company is not registered in the Netherlands. A foreign company cannot loan from a Dutch bank when not registered in the Netherlands. In their home country they can, so the choice is easily made.

driving a non-Dutch license plated car. Lovely orange colour by the way.

What if your employer decides to issue you a company car with foreign plates?

Then you need a permit from the Dutch tax office to drive this non-Dutch license plated car. There are two permits. In order to know which permit you need to apply for, we need to know more about who you are.

Who are you?

If you are an employee of the foreign company that is part of the board that determines who drives which type of plated car, then you are a special employee. An employee that has influence on the license plate of the company car. The tax office will issue a permit  to drive the non-Dutch license plated car in the Netherlands. The condition is that you can only drive on the road that leads direct to the office of the company abroad. This car cannot be used for any other purse than this distance.

If you are a regular employee that is confronted with a foreign license plated car and you cannot plead for that or argue this fact, then you receive another permit from the Dutch tax office. This permit allows you to drive where ever you like in the Netherlands. The condition is that you and only you drive this car.

What value to add to your income for private use of the company car?

In the Netherlands we understand that the company car is also used to go to the beach, purchase grocery’s or go on holiday. Anything you get from your employer is taxed salary and this personal use of the company car is referred to as a remuneration in kind. The value of the amount processed in your salary specification depends on the new Dutch purchase price of the car including VAT.

What happens with the foreign license plated car in this respect? The same applies, a percentage of the Dutch equivalent of the new purchase price including VAT of that car is taken into account. Not the actual purchase price paid for in that other country.

Tax-is-exciting

We think tax-is-exciting but we also think that a Dutch car is heavily taxed. The heavy tax is part of the policy of the Dutch Government to reduce the usage of the automobile. In other EU countries the taxation can even be higher like in Scandinavia. But in other EU countries the tax can be much lower on cars or not existing like Germany and Luxemburg. To prevent shopping around, rigid rules are in place.

Sorry for the dashes in the middle of the word tax-is-exciting. Apparently Google has a dirty mind and sees only a three letter word that we refer to when we practice to reproduce ourselves. Anything related to that word is spam, hence this devout solution.

The electric company car

Tax Tax Tax

The electric company car offers opportunities. Many tax credits are offered, what do they imply?

The electric company car

In the event you have read my articles about the company car, you might have noticed that I am not very font of the company car. The famous question is whether the car should be purchased privately or on the company. If you make the full calculation, that is up to and including selling the car to a third party or yourself, there is hardly any difference.

The electric car is slightly different. If you purchase in 2020 an electric car as private individual you get a EUR 4.000 subsidy. Even though the funds of the 2020 subsidy was open from July 1 and fully consumed on July 1, the Government promised to put more funds in the subsidy and then retro actively it can be used.

The electric company car offers a number of tax benefits:

MIA – Milieu Investeringsaftrek – the environmental investment deduction

The MIA offers a 13,5% tax credit on the electric company car, but is maxed. There is a list of amounts per car, but if you have a regular small full electric car the maximum is EUR 40.000 being the purchase value excluding VAT.

How much is 13,5% MIA tax credit? Let us assume you purchase a EUR 40.000 full electric car that is not a transport car, but a regular car, then you can take 13,5% of EUR 40.000 if you purchased for EUR 40.000 ex VAT a company car being EUR 5.400. If your BV company has a EUR 200.000 or less profit, it is in the 16,5% (2020) corporate tax rate, hence 16,5% of EUR 5.400 is EUR 891 is the amount you pay less in corporate income tax.

So 13,5% MIA tax credit sounds a substantial discount, but in the end it is a marginal discount, but a discount never the less. You will learn that it is the combination of credits that make it interesting.

To be able to apply for the MIA you need to have the E recognizing certificate to be able to communicate with our Government. Please apply for this regardless, if you have a company. Best is level 3. Then to actually be able to claim the deduction you need to apply for the MIA withing 3 months from the moment you signed the agreement of the purchase of the company car. Not from the moment of delivery. If you are outside the three months window, you are too late.

KIA- Kleine Investeringsaftrek – small entrepreneurs investment credit

KIA is not the car brand, but a company tax credit for which normally no family type of car can qualify. For the electric car an exception has been made in 2020. The KIA is a gliding scale of investment credit that goes down the moment the investments go up. If you invested more than EUR 2.400 but less than EUR 58.238, you are in the 28% additional tax credit. That implies on top of your investment you can take a 28% tax credit. If you purchased the EUR 40.000 electric company car that qualifies for this deduction, you can deduct 28% if you are in the 28% bracket of EUR 40.000 being EUR 11.200. If you are in the 16,5% corporate tax bracket, you pay 16,5% of EUR 11.200 being EUR 1.848 less corporate income tax. Again, not a huge amount, but a discount never the less.

The electric company car

Random depreciation

You wonder where is then the big money in deductions? The big money is in the random depreciation. Random is as random as you like. Normally if you invest you need to calculate what is the rest amount at the end of 5 years and the investment value above that amount you are obliged to depreciate in a 5 year time, linear. Regardless if the investment lasts for 5 years.

The exception is made for the full electric car that qualifies for the KIA, you can randomly depreciate. Random implies you can depreciate 100% of the car in 2020 even if purchased on December 31 of 2020. Obviously you have no more to depreciate in the next 5 years and the day you sell the car, you make a profit as you also depreciated the rest value.

If you purchase a EUR 40.000 electric car, you expect it to have a EUR 10.000 value after 5 years, then you can depreciate in 2020 EUR 30.000. That is EUR 30.000 less profit at 16,5% corporate income tax, being EUR 4.950.

Summing it all up

You purchased a EUR 40.000 electric car excluding VAT, you pay EUR 891 less corporate tax due to MIA, you pay EUR 1.848 less corporate tax due to KIA and EUR 4.950 less corporate tax due to random depreciation. That is a total credit of EUR 7.689 you pay less in hard euros when you file your corporate income tax return.

Tax is exciting

Tax is exciting and in my opinion with the goals of our Government it could have been much more exciting if the limit of excitement was not EUR 40.000. If you do a little research you find that not many car qualify, as an electric car is simply still expensive. But if you do find one and you have a discussion with yourself to use it either private or on the company, then we have no answer. The EUR 4.000 private used car is a good subsidy and the max subsidy you can obtain via the company is EUR 7.689. If the car is not for you to use, but for instance for an employee or pool of employees, these are the tax credits you could claim, if you are in time.

Company car – private use value added to the income

The company car, the most advised product in our business. Basically the question never changes, how can I drive the too expensive car for the lowest fiscal consequence, or how can I limit the private use value added to the income.

Company car – private use value added to the income

In the Netherlands you can drive a company car, but you are expected to drive the car also for private use. Private use is for instance in the weekend, on holiday, to the supermarket or dentist. To charge the user of the company car for this private use, a percentage of the Dutch catalogue value of the company car is added to the taxable income. The percentage depends on the criteria a car needs to meet. But the client base we serve goes for the 22% (as of 2018, before 25%) added to the income.

Company car – NO private use value added to the income

If you do want to drive a company car but you do not want to be charged for the private use, then you should not use the car for private use. Simple as that. Not so simple is to proof to the Dutch tax office that you have not used the car for private use. For this proof you need to provide a full kilometer administration. Every single KM you need to explain. So no 10 KM margin, but exact to the dot.

Our experience is that the tax office will full go through the administration and will notice mistakes you might have made at certain junctions (!). In the past the tax office compared your speeding tickets with your KM administration. No idea how privacy rules look at this. But many company car owners now do the same. However, you also see non speeding camera’s in Dutch traffic, especially at the border to check the KM administrations of employees claiming not to use the car for private use.

Court case – private use value added to the income – Audi S8 & Audi S8

How many Audi S8 can you drive at a time, apparently two. This entrepreneur drove a 2012 Audi S8 as company car and transferred this Audi S8 to his private name, so no longer a company car in December 2012. Early 2013 this 2012 Audi S8 was traded in for a 2013 Audi S8 and again this new Audi S8 was considered a company car.

The difference between the use of the 2012 Audi and the 2013 Audi is that for the 2013 Audi the entrepreneur is keeping a KM administration hence no private use value added to the income.  If you know the Dutch catalogue value of these types of cars, even without the options, huge amounts. Hence we understand his need for KM administration.

However, the max amount of KM you can drive while you keeping KM administration is 500 km. That is not per car, that is per calendar year. The entrepreneur understood that hence via the signature of nobody less than the local notary he put in writing that a few KM were driven with the 2012 Audi in 2013 for the company. Employees were keen to state that their cars were used by the entrepreneur while he visited clients.

Moreover, the entrepreneur claimed to have made a significant loss on the sale of the 2012 Audi to himself privately.

Private use value added to the income

The tax office disagrees with the entrepreneur. Not only is the loss of the sale of the car to himself rejected, but also the entrepreneur will be charged with a value of 25% of the Dutch catalogue value of both cars to his income for the period of time the cars were in the company in 2013. The entrepreneur claimed no longer to have the 2012 Audi in the business in 2013, the tax office states he had, regardless of the sale. Hence the entrepreneur had 2 Audi’s at the same time in the company in 2013.

The regular court nor the high court agreed with the arguments of the entrepreneur. The notary is not the method to proof whether a car was used for private us. That is the KM administration. Statements of employees can be questioned as they depend on the entrepreneur, but if then it shows that these statements have been drawn by the entrepreneur and are open for debate if it actually states he did not drive for private use, then the statements are void.

The outcome was that the combined use of both Audi’s in the year 2013 for private use exceeds 500 KM, hence for both cars 25% of the Dutch catalogue value was added to the income.

Orange Tax Services

The value added to the income of a car is to compensate the private use of the car. If you then purchase a company car you basically cannot afford, or you purchase two of them at the same time. They you can have issues. But if you play by the rules and no longer use one car for the company, keep a KM administration and not use both cars in 1 calendar year for more than 500 KM while they are registered on the company, you do not have the above problem.

The above problem is basically caused by thinking it will all work out with some statements. But that is not the case. Bottom line: if you cannot afford the tax due, do not purchase the car.

Company car – a tennis instructor needs three

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 tennis instructor

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.

Orange Tax Services

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.

Taxation and a company car

Driving a company car in the Netherlands is not a free treat of the employer. Taxation and a company car go hand in hand for the private use of the car. The employee needs to add a percentage of the Dutch catalogue value to his or her income as that is regarded salary for private use. How can this go wrong?

Taxation and a company car: percentage added to the income

If you drive a company car then up to December 31, 2016 25% of the Dutch catalogue value is added to your income. That is a percentage which is fixed for everybody, unless it is clear the car is not so much used for the company, but nearly privately only, then the percentage could be increased.

Should the emission of the car be extremely low, a lower percentage is added to the income, if criteria have been met.

The 25% added to the income solves many aspect of private use of the company car. The travel home is covered, if you use the car for holiday purposes all car costs (tol, parking, ferry, petrol) are tax deductible. Fines not unfortunately.

Now, from 2017 onwards, the standard percentage added to the income is 22%. Politicians do what they are good at, hence the simple regulation has been changed in a very complex regulation. That implies if you drove a 25% car in 2016, the 22% does not apply to you, unless you change cars in 2017. Low emission cars have a low percentage added to the income of 0% or 4% or 7% depending on the year, emission and type etc.

If you then purchase the Porsche 918 and you think you can benefit from a 0% percentage added to the income for private use, you learn that this percentage is limited to a maximum catalogue value and the Porsche 918 does not qualify. Many more specific rules have been introduced this year.

Of course politicians would not be politicians if they would not complain about the tax legislation they proposed is becoming so complex.

Taxation and a company car

How can the company car percentage added to the income go wrong?

The exception for the amount added to the income is when you can proof that you drive the car for private use for less than 500 km per year. The proof is not an easy task, as you need to show when, what time, what KM driven, what was the KM status of the car for what purpose you have driven the car. That can be solved with a black box in the car.

Taxation and a company car: How can it go wrong?

Besides the fact that you do exceed the 500km and you do not report that we have the situation of changing cars.

If you drive a company car and you can proof that you have not driven more than 500 km pro rata for the period of the year for private use then changing cars can be an issue. If you proof you do not need to add a percentage to your income for the one car, but you chose not to continue this for the next car, there is a problem.

The problem is that you still need to proof for the full calendar year you have not driven more than 500km for private use. So you need to continue working with the black box, also in the new car where you accept that 22% is added to the income.

So with the one car you prefer not to pay the tax and with the other car you do not mind to pay the tax, as it is for instance zero per cent. Within the year of changing cars you need to keep track of the KM driven the full year. It cannot exceed 500 km total, both cars combined.

Percentage added to the income – court case

In a court case an employee drove a company car for which 25% of the Dutch catalogue value was added to the income. She kept track of the private KM driven and managed to remain under 500km, hence nothing was added to her income for the private use of the car.

She changed during the year to a 0% company car. That implies no amount is added to the income for private use even if used for private use, hence the employee did not see the purpose of keeping track of the KM driven or she did not see the need to remain under the 500km. Hence she speed off and exceeded the 500km.

The tax office charged her with additional income tax due over the EUR 33.885 catalogue company car for the 308 days driven at a 52% tax rate being EUR 3.717.

The lady complaint because what is the point keeping track of the KM driven when 0% amount added to the income. The answer is a decision from the High Court that states that the 500km maximum amount that prevents a value being added to the income for private use of the company car is calculated per calendar year. Not per car.

In the calendar year two cars were driven, hence of both cars the KM needs to be monitored if the 500KM is not being exceeded. As that was not the case, the initial car the employee drove did not meet the requirements and pro rata the 25% of the Dutch catalogue value was added to her taxable income.

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The most advised question in the fiscal field is about taxation and a company car. Is it better for me to drive a company car or a private car? In the end the personal desires of the person driving the car make any fiscal advise given void.

If you are the employee and you cannot afford a car, get the company car. Cheaper you cannot drive. However, if you are the employee/entrepreneur and basically paying for everything  yourself, business and personal. In that situation most of the time the cars that make it tax wise interesting to drive as company car is often not the desired car of the employee/entrepreneur. In that case it is better to drive the car privately.

How does the tax advice given become void? The employee/entrepreneur focusses on the VAT refund and the fact that the company is paying for the costs. However, the pain is in the annual amount added to the income and if the car is being sold, VAT is due. That is not experienced until the decision has already been made.

 

Do not start an argument that you already won – car parking costs

In the Netherlands parking your car without paying for parking is a commodity only possible in the country side. The local cities have become very creative with scanning cars. Cars that drive at a normal speed through the city, scanning all license plates of parked cars. If a car has not paid for parking a team is send to the car to issue a parking fine.

Car parking costs – friendly parking attendant

A car was parked without a parking ticket and while the owner of the car realized that the parking attendant was already at the car. The fact that the car was parked and no parking fee was paid was clear, but the parking attendant gave the owner of the car a break. Pay EUR 0,50 in the parking machine and I write not parking ticket.

Instead of doing so, the owner of the car insisted on using a mobile app to pay for parking. But the parking attendant can then not check immediately if the parking fee was actually paid, hence he disagreed and said: No, sir, please pay EUR 0,50 in the machine and then we are done.

Nop, the owner insisted on using his app. That was the end of it, he was issued a EUR 61 fine for not having parked his car and paying for it. You might not be surprised that the owner of the car started a court case over the EUR 61 parking fine, but the court ruled that there was not paid for parking, the parking attendant was in no manner obliged to provide you with the possibility he offered. Nevertheless, the solution was not accepted, hence the EUR 61 fine was correct.

 

Car parking costs – two pictures of the same with a different view

A lady received a fine for not having paid for parking. She made a complaint and issued with the complaint a picture of the car being parked with the parking ticket behind the window. The ticket was indeed dismissed, however, the lady had requested a reimbursement of the costs made for the complaint. That was not granted.

The lady went to court over the non-reimbursed costs for the complaint. That implies the full case is revised. Standard procedure of the parking attendant is to make a picture of the situation when there is no parking ticket. Clear became that the picture of the parking attendant was of a total different situation than the picture the lady provided. The court ruled that the parking ticket was indeed not paid for and the parking ticket was reinstalled again.

car parking costs

Car parking costs – wind blows ticket away

The car was parked, ticket purchased, but while the door was being closed of the car, the wind took hold of the parking ticket and blew that to a place the parking attendant could not check. Hence a parking ticket was issued. The case was won by the owner of the car, but no reimbursement of the costs of the complaint were made. There was an argument over the non reimbursed costs, but the court was clear. If you were more careful with the parking ticket, the case would not have taken place, hence no reimbursement.

 

Car parking costs – wrong license plate on the parking ticket

Most parking machines ask for the license plate number, then when the scanning car checks vehicles, the car is in the system. This time the license plate number was incorrectly put in the parking machine and a parking ticket was automatically issued.

The owner of the car made a complaint against the parking fine using the proof of payment for the parking costs. The parking fine was nullified, but no reimbursement for the costs of the complaint was granted, hence the owner went to court to claim the reimbursement. But not only to claim the reimbursement, also to make a claim on article 8 of the EVRM as a person should not be checked by its whereabouts using a scanning car by the city.

The court ruled that the parking ticket was nullified, but that she had made a mistake, hence no reimbursement of the costs of the complaint was granted. The article 8 EVRM was not applicable, as the car was parked in a public space and then the privacy cannot be invaded.

The owner disagreed and went to the high court.

 

Car parking costs – tax deductible cost?

Parking costs of a company car are a tax deductible cost, whether made domestic or abroad. That is when the car is a company car. If there is no company car and a private car is used for business purposes EUR 0,19 per KM for all costs is applicable. No addition Ferry or parking costs can be added.

A parking or any other fine is a nondeductible fine. However, in most cities not a fine is issued, but parking tax for not having paid the correct amount. That is a tax deductible tax.

 

Car parking costs – Orange Tax Services

If you own a car, you need to pay for parking and if you think parking fees are too high, park somewhere else or do not have a car. But arguing a EUR 61 fine/tax for not having complied with the rules is almost abusing the legal system. However, if you are right, you are right. Then again, if you are right/wrong and you continue the legal argument over a parking ticket to the higher court is something I find difficult to understand. There are enough theft, robbery and other crimes that should be handled by the court then a EUR 61 parking ticket.

 

Driving a car in the Netherlands is expensive – car tax

Car tax in the Netherlands is high. There is import duty on the car. If you drive a company car, a percentage of the Dutch catalogue value is added to your taxable employment income.

Company car and car tax

If you have been issued with a company car, the advantage of this car is regarded a taxable remuneration in kind. The value of this remuneration depends on the car. If the car has no emission the value is set at 4% of the Dutch catalogue value. When the car has nearly no emission the car tax is 15%, then there is a 21% percentage for low emission cars. All other cars have a 25% of the Dutch catalogue value added to their income.

If you can proof you have not driven more than 500 km during a calendar year for private use with the company car, no value is added to your income. However, you need to indicate this to the tax office via a request at the start of the calendar year. At the end of the year you need to be able to substantiate this with a KM overview specified up to the single km driven. The tax office monitors this with the non speeding cameras you see on the road. Also speeding tickets are taken into account.

car tax

Company car and skiing holiday

The director shareholder of a BV company had such a 0% amount added to the income request made for the year 2009. In the week of February 20 there is a children’s holiday and he went with his family in the company car to Austria. He dropped of the family at the hotel and drove 60km onwards to a meeting he had with a business relation. In the evening he returned to his family and after a week of skiing the family drove back to the Netherlands.

The tax office challenged the 0% value added to the income due to the trip made with the car for the skiing holiday in Austria. The director countered that challenge with the business meeting, which made the trip a business trip. The court ruled that the main goal of the trip determines whether it was for business or pleasure. The main goal was the skiing holiday, as that was already planned a long time in advance. The business meeting was arranged for at a later stage. The consequence is that the 0% value is not applicable and 25% car tax was added to the income most likely with a 25%-50% penalty on top.

Import duty on car and fake rental agreement

The rule is that you cannot drive a foreign license plated car in the Netherlands if you are a Dutch resident tax payer. Every Dutch resident tax payer needs to pay import duty on a car. Unless the car qualified to be imported under the household rules of immigration. There are two exceptions, but if you qualify for those exceptions you need to carry the certificate of that exception with you in the car while you drive it.

March 2012 a car with a Belgium license plate was stopped by the Dutch police. The Dutch resident tax payer driver claimed to have rented the car in Belgium for a three day period. He forwarded the rental agreement and the proof of payment a couple of days later. The Dutch tax office did not charge him car tax for this event.

In March 2013 in a criminal investigation it came to light that the rental agreement shown a year before was fake. The EUR 61.970 import duty was charged and increased with 50% penalty. The car was shown multiple dates on the Dutch roads, justifying the tax. The penalty could not be argued as the user willingly forged forms to prevent paying the EUR 61.970 import duty on the car.

Import duty reduction and “second hand” car

The rule is that you need to pay tax on import of any car from abroad. The tax is base on emission of the car and the tax is high. If not a brand new car is imported, a reduction of the tax is provided. The reduction is a depreciation system over a 8 year period where at the end 10% always remains.

Between September 2012 and January 2013 a BV company imported 39 cars for the purpose of resale. In each import duty tax return a reduction of the import duty was claimed for the fact that the cars were not brand new. The tax office challenged the import duty returns and charged EUR 6.111 additional import duty.

The reason for the challenge is that all cars had driven at the time of import not more than 39 km. Some of them had not even driven 10 km at that time. Besides the low km driven, some were imported within 2 weeks of the first registration of the car abroad. None of the cars had any usage damage or damage all.

The court ruled that the guidelines state that if a car was registered abroad, a reduction in import duty can be claimed. Even if the car is as new as it looks like. The tax office lost this case.

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The company car is one of the most advised products. The outcome of those reports is nearly always the same. Both sides, purchase private car or use a company car, have non comparable pros and cons. In the end the simple answer is that you should not drive a car you cannot afford. At the same time the car industry is teasing you with beautiful models. Hence the question keeps on coming back about what to do with a car.

 

Drive a company car and tax

If you have a company and you drive a company car, a value of the car is added to your income. The reasoning is that you have an advantage by using the car and having the company pay for the costs. That advantage can be between 7% and 21% over the Dutch catalogue value including VAT and BPM. BPM stands for the import tax.

How to avoid the car being taxed?

In our line of business you have a limited number of questions that keep on returning, among one of them the company car. Basically the question is always the same: how can I drive the nicest car at the lowest costs?

There are three possibilities:

  • Not drive a company car.
  • Drive a company car, use it for less than 500 km per full year for private use and keep a detailed mileage administration to proof the private use was under 500 km
  • Add the percentage of the private use to your income and deduct the costs.

The percentage added to your income depends on how environment friendly the car is. At the time of registration this is determined and then a sticker with a percentage is put on the car. In my opinion the most fun cars you pay the high percentage for.

The number 2) possibility is the possibility common sense could make, but experience has learned that while actually driving the car, the mileage administration is soon seen as a burden to be updated during the weekend. Then it is forgotten in the weekend and updated many weeks later. The Dutch tax office has placed cameras on the Dutch national roads and can easily challenge your administration. In our opinion number 2) is the non workable solution.

How many company cars can you drive?

In this case a BMW, Audi S5 and Audi S4. You never know what you feel like driving in the morning. This person had added to his income only 25% (old percentage) of the new Dutch catalogue value for the BMW to his income and kept a mileage administration for the Audi’s.

You might understand that the Dutch tax office was keen to see the administration of this company and did an audit in 2011. It turned out that the mileage administration of the Audi’s was more a good guestimate than an actual administration, hence dismissed, and 25% of the catalogue value of each Audi was added to the income as well, plus a 10% penalty, being EUR 30.103 in wage tax to be paid.

The person in this matter made a complaint with the court. The court determined that the gas to kilometre driven varied from 1:1 to 1:22, not in line with the KM administration, neither did the gas receipts have the correct KM registration on them. The wage tax assessment remained.

Audi company car orange tax

Orange Tax Services

We very much can understand a person driving the cars mentioned, but maybe it would have been better to keep your hobby private and a cheap taxed business car corporate.

How not to drive a company car

The company car is always a hot item in the Netherlands. The problem is that it is convenient to have the company pay for the running costs of the car, and the person driving it enjoys the usage at low or no costs. If you are an employee of the company, the usage of the company car is a remuneration in kind. If you are the owner of the company and maybe not being the employee, the same type of remuneration is expected to be enjoyed.

company car orange tax

There are different types of valuation for the remuneration. The valuation is expressed in a percentage of the Dutch catalogue value of the car including VAT and BPM (tax), based on the CO2 emission of the car. The emission is determined when the car is being registered in the system and is shown on the ID papers of the car. The tax office keeps online lists of which percentage is to be added to the income at which CO2 emission.

How not to do it?

A managing director 100% owner of a so called holding company provided a 100% daughter company of this holding company with management services. The director was employed by the holding company, but received for his management services the usage of a company car by the daughter company. For the private use of that company car he paid the daughter company the 0,19c per KM.

In the payroll administration of the holding company no remuneration in kind was taken into account for the fact that the director was driving a company car. The thought was that the car was not provided by his direct employer and he already paid EUR 0,19c per KM for the private use.

The Dutch tax office issued for the years 2010 up to 2013 an assessment for the amount related to the value of the company car for private use and increase the total amount with 25% penalty. The director made a complaint based on an article he had read in which a similar kind of construction was being explained. The court ruled that tax is levied based on legislation and jurisprudence, not on articles without base in the jurisprudence, not that this construction was in line with that article. The EUR 0,19c per KM could also not be accepted as a reasonable reimbursement for the private use of the company car, as EUR 0,19c will not be able to cover the costs for the private use.

In my opinion it is a bit naïf to shuffle the car between companies that you in the end own for 100%. Not that the outcome would have been different when you did not own both companies, but if you do own them all is the same, regardless how complex you make it formally.

Orange Tax Service

We know how to process a company car and we will inform the employer of the possible liabilities if an employee states to have claimed the non private use of the company car status, and the tax office is able to proof (easily) that the company car was used for more than 500km year for private use by this employee. The hassle of recouping the tax from the employee will most certainly jeopardize the working relation. Keep it simple, if you want to drive a company car, pay the price.

How not to cheat the road tax?

Having a car in the Netherlands is expensive. Not only did you pay taxation on the import, you pay quarterly taxation on using the road. Gasoline is around 70% taxation, the other part are the genuine costs of petrol.

The road tax depends on the type of petrol you use and the type of engine in the car. The lesser CO2 is in the emission rates of the car, the lower is the road tax. If you use diesel or gas in the car, the road tax is substantially higher than if you use petrol. In the end it is a mathematical decision where you end up. In other words, if you have a high mileage per year, diesel could be the better choice as the lower costs at the gas station makes good the higher road tax amount.

toll and tax

Deregister car for road tax

If you have an old timer that is expensive for road tax, or you do not use the car for any reason, you could report that to the tax office and claim that the car is not on the public road. Then you do not need to pay the road tax for that period.

How not to cheat on deregistration for road tax?

A car trade company had in its stock of trade cars a van. All of trade cars are deregistered from road tax. Never the less the tax office registered on August 7, 2013 that the van in name of this car trade company was driving on the road. As no road tax was paid, the tax office assumes that the car should have received a road tax invoice for all months it was so called deregistered plus a penalty. In this case EUR 418 road tax assessment plus 100% penalty.

The car trade company made a complaint against this assessment as they have on register that the van was purchased with 220.000 km on the clock and when the van was sold on September 4, 2013 the clock showed again 220.000 km. Even though the court accepted this proof, maybe also in line with the low amount of tax being the issue, the high court disagreed. The high court could not believe any person would purchase a second hand car without making a test drive even once.

Maybe the fact that exactly this van was fined for speeding during the period this car trade company had the car on stock, and this speeding ticket was paid without any complaints, made the case the car was used on the road.

If you cheat, do not speed.

Tax office and auditing

The Dutch tax office is an organization where the majority of the employees are at an age that they will retire within about 3 to 4 years. Then on top of that the staff is to expensive, so persons will be dismissed. In order to be able to do the checking on simple aspects like road tax, camera’s are being used. You might have noticed a ‘Belastingdienst’ car on the road with a camera sometimes accompanied by two motorcycle assistance. Even thought you reduced your speed to prevent a speeding ticket, they were not there for speed, but for matters like road tax and outstanding tax assessments. So please pay and pay in time.

Orange Tax Services

We do not provide services in the field of road tax, you have to pay the road tax or sell the car. However, we are in the field of determining your fiscal residence. Should your fiscal residence be in the Netherlands and you drive a car with foreign license plates, you have a problem. The problem is that you should have converted those to Dutch plates, or have left the car in the country where you came from.

If your car is stopped, then the person driving the car regardless who that is, is to pay the tax on the car. We have jurisprudence on Belgium license plated car, driven by a Dutch tax resident who was a friend of the owner, the owner was also in the car when stopped, but the Dutch tax resident was due the tax on the car, even though the car was never imported, as the friend drove home to his house in Belgium with his car. In this case it as was a Porsche 911, so the amount of tax was substantial as well. This rigid this legislation is.

Would you like to learn more about your place of fiscal residence, do not hesitate to contact us.

How not to import a car free of BPM

In the Netherlands we have taxation on cars. The name for this tax is BPM and the reason why we pay this tax can be various. Environmental or simply cash for the Government. The system has changed over the years from a simple 45,2% tax on the Dutch import value. So many wreaks were imported with zero value, hence zero BPM, and then those wreaks were ‘unwreaked’ in Eastern Europe, filled with all kinds of luxury accessories and sold for a good price. I know, as I bought one. A wreak remains a wreak with our without accessories.

The system of BPM changed to a CO2 emission taxation. It goes without saying that zero emission cars pay no BPM and dirty cars pay the max. It goes without saying as well that the Dutch imported in high volumes zero emission cars, which resulted in low BPM income for the Government, with the result that zero emission cars pay now BPM as well. From an environmental point of view not a firm policy. It is again a matter of green in the pockets instead of green in the air.

BPM on import cars

Importing a car BPM free

If you are an immigrant into the Netherlands, and you have owned a vehicle in your name for at least 6 months abroad, then you can request with the Dutch customs to import the car within the house hold goods free from BPM.

We have experienced that person terminated their job abroad and took over the company car because it was a nice car, then they moved to the Netherlands and had to pay BPM over the car, even though they have driven the car for a long time, it was owned by them less than six months.

How not to import a car free of BPM

A Dutch resident tax payer took on a job in Germany in 2012 and migrated to Germany. In May 2012 he purchased an Audi S5 from 2009. The employment was terminated April 2013 and this person returned to the Netherlands.

At the border he claimed that the car should be imported BPM free, as he owned the car for more than six months and he claimed to import it in the household goods.

The customs rejected his request. The cause of the rejections was multiple. This Dutch person might have claimed to have moved to Germany, but in fact he had not registered himself in Germany, neither did he pay Germany tax and social premiums over his German income, he was still insured for health care in the Netherland, had a Dutch doctor and dentist. Moreover, he remained registered with city hall in the Netherlands.

All points for the Dutch tax office to determine this person never moved his central point of life from the Netherlands to Germany. Which implies you cannot move it back, thus cannot claim to import the car free of BPM.

GB import?

I do not want to state the obvious, but importing a car from Great Britain, Australia or Japan is also not recommended. No tax related reason, but having a Dutch license plated car with the steering wheel on the side we consider being wrong, will result great difficulty when you would like to sell this car.

Orange Tax Services

We do not assist with the import of cars and BPM tax filings, for that you have specialists. What we do, basically every day, is determining where you  or your company has its residence. You might have the opinion not to be a Dutch tax resident, but if the facts and circumstances proof otherwise, you need to act on that. Here we an assist you.