If your employees use a company car, there are already many things to take into consideration. And now that employees work from home more often, new questions may arise as to the use of such company cars and additional tax liability. To make matters even more complicated, the rules regarding tax liability for zero-emissions vehicles will also change. To help out, we have answered a number of frequently asked questions on the taxation of company cars.
If an employee can prove (s)he did not make private use of his/her company car for more than 500 kilometers per year, there will be no additional tax liability. Although not necessary, it is recommended to keep a register of the number of kilometers the employee travels in the company car. There are various different registration tools available for this.
1) If the contract with the employee states that private use of a company car is prohibited, does that automatically mean there is no additional tax liability?
Only prohibiting the private use of a company car is not enough to guarantee there will be no additional tax liability. This also requires the following:
- you must check and keep a register of the use of the vehicle in question;
- the employee cannot be insured for private use of a company car;
- the employee is in possession of a private vehicle;
- you must impose an appropriate financial penalty in the event of private use of the vehicle in question, for instance a fine equal in amount to the tax due as a result of the private use.
Subsidy up to € 5,000 for purchasing an environmentally friendly delivery van
As of Spring this year, you can apply for a subsidy of up to € 5,000 for purchasing or leasing a zero-emissions delivery van. The subsidy is an incentive by the government to encourage organizations to purchase or lease environmentally friendly delivery vans. The subsidy is 10% of the van’s price, with a maximum subsidy of € 5,000. The subsidy is available until 2025. In total, € 185 million has been reserved for the subsidies, with € 22 million for subsidies applied for in 2021. In order to be eligible for the subsidy, the following conditions must be met:
- the delivery van must have a range of at least 100 kilometers;
- there is a maximum to the number of vans for which an organization can apply for subsidy;
- if the van is resold within three years of purchasing, the subsidy must be partly paid back.
2) Company cars are currently left untouched for a long time because of the lockdown. This could lead to technical problems. If an employee goes to drive in his/her company car in order to avoid these problems, does the trip in the car count as business-related use?
Yes, this trip counts as business-related use. However, a few conditions apply. First, the employer must have given instruction to the employee for the trip and the employer must be able to prove that it was for business-related purposes. The employee is then responsible for registering the kilometers driven and including the reason for the trip.
3) Normally, our employees only use their company cars during working hours. Outside these hours, the cars are parked on our organization’s premises. However, the current mandate to work from home means our employees now take their cars with them. What is the impact of this on additional tax liability?
For the period of time the employees take their company cars with them, the cars have in principle been made available for private use. This could mean there is additional tax liability, but only if an employee makes private use of the car for more than 500 kilometers per year. Then you must add a specific amount for the private use of the company car to the taxable wages of the employee. If private use is less than 500 kilometers per year, there is no additional tax liability and thus no amount needs to be added to the taxable wages of the employee in question. It is the employee who must be able to prove (s)he did not make private use of the company car for more than 500 kilometers. The latter can be done by means of a registration tool.
If the car has been made available for private use for only part of the year, you must convert the number of actual kilometers driven during private use to the number of kilometers the employee would have driven during private use had the car been made available for the full calendar year. For example, if the employee drove 120 kilometers during private use of the car in three months, you must convert this to (12/3 x 120 =) 480 kilometers per year. In this case, this is less than the 500 kilometer threshold, so there is no additional tax liability.
4) The employees have handed in the keys to their company cars during the coronavirus pandemic. Currently, the cars are parked in a locked garage belonging to our organization. What is the impact of this on additional tax liability?
In this case, the cars are no longer available to the employees for private use. Therefore, there is no additional tax liability and you do not have to add any amount to the taxable wages of the employees in question. However, do not forget that the number of kilometers driven by an employee during private use in the period the car was available must be converted to the number of kilometers the employee would have driven during private use had the company car been available for the full calendar year.
5) Additional tax liability was allocated to an employee last year, but at the end of the year it turned out (s)he had driven less than 500 kilometers during private use of the car. In other words, the additional tax liability should not have been allocated. How do we correct this mistake?
There are various possibilities for correction. First, you can submit a correction for the payroll tax return (‘correctiebericht aangifte loonheffing’ in Dutch). However, a statement by the employee is not enough here. You as employer must also be able to prove the employee did not drive more than 500 kilometers during private use.
Another possibility for correction is that the employee him-/herself objects against the incorrectly withheld payroll tax. This must be done with inspection by the employer. A successful objection will lead to a refund of the incorrectly withheld payroll tax. However, the employee in question must always be able to prove (s)he did not exceed the 500 kilometer threshold.
6) Our employees drive in an electric company car. Is reimbursement of the expenses made on installing a charging point tax-free?
If employees drive in an electric company car, any related expenses may be reimbursed tax-free. This includes expenses made on charging the vehicle and installing a charging point. Such expenses fall under so-called intermediary costs (i.e. costs paid for by the employee and reimbursed by the employer). Do not forget to make good agreements on how and when expenses can be claimed for reimbursement. The registration of expenses made on installing a charging point may not as much of an administrative burden; however, if an employee claims expenses for charging his/her vehicle every single day, the registration of expenses quickly becomes an administrative nightmare. Therefore, agree with the employee(s) that expenses can be claimed monthly, for example.
Tax for changing point remains low
Until the end of 2020, a reduced energy tax rate applied to the taxation of electricity from public charging points. This reduction was intended to eliminate the price difference between charging your electric vehicle at a home charging point or at a public charging station. The Cabinet of the Dutch government has now decided this reduced energy tax rate will also be in effect for 2021 and 2022.
7) An employee for whom no additional tax liability was allocated has used his company car more often in an attempt to avoid having to take public transportation. This caused him to exceed the 500 kilometer threshold. What should we do?
If an employee exceeds the 500 kilometer threshold, additional tax liability should be allocated immediately. This means that from the moment the threshold is exceeded, a certain amount for the private use of the company car should be added to the employee’s taxable wages. If the employee is in possession of a ‘Verklaring geen privégebruik’ (No Private Use Statement), (s)he is responsible for paying any unpaid payroll tax due for previous tax periods as a result of exceeding the 500 kilometer threshold. However, if no additional tax liability was allocated for reasons other than a No Private Use Statement, any unpaid payroll tax due for previous tax periods must be paid by the organization.
Driving an electric company car will become less and less favorable for the employee
If an employee makes private use of a company car for more than 500 kilometers per year, an additional tax liability will be allocated. The usual rate for this additional tax liability is 22% of the vehicle’s catalog value, but for 2021 a reduced rate of 12% applies to new, fully electric cars. The application of this reduced rate is nonetheless capped. This means that it is only applicable below a maximum amount of the vehicle’s catalog value. For 2021, this maximum amount is € 40,000. Above this amount, the usual rate of 22% applies.
The reduced rates for fully electric cars will be phased out slowly, as agreed upon in the Dutch Climate Agreement (‘Klimaatakkoord’ in Dutch). This means a rate of 12% in 2021; 16% in 2022, 2023 and 2024; 17% in 2025; and eventually 22% as of January 1, 2026. The latter means that as of 2026, the usual rate of 22% will also apply to electric vehicles. Moreover, the cap of € 40,000 will remain in effect for the next few years until 2026, after which it will be abolished. The cap does not apply to hydrogen vehicles and – as of 2021 – solar-powered vehicles.
8) We rent batteries for our electric company cars. Should we include the costs of these batteries when determine the catalog value?
Yes, the catalog value must include the costs of batteries since this value is related to the Certificate of Conformity or type approval issued by the Dutch Road Traffic Service. The battery is part of the car, as is the fuel tank in non-electric cars.