Where a car is also made available to an employee for private use, an additional taxable amount must be taken into account for income tax purposes. This also applies to the director and majority shareholder (DGA), who is, after all, an employee of his (or her) private limited company. The only way round this is to provide convincing evidence that no more than 500 kilometres were driven for private purposes in a calendar year.
Short-term lettings
Arnhem-Leeuwarden Court of Appeal has recently ruled that short-term hire of the car does not constitute a breach of the provision of the vehicle. During his holidays in 2015, the director and major shareholder in question hired the car from the private limited company. He paid the company €1,106 for the 5,621 kilometres travelled. In addition, the director and major shareholder covered the fuel costs during the holiday himself.
The Court ruled that the car was at the director’s disposal throughout the whole of 2015. The director must therefore prove that fewer than 500 kilometres were driven for private purposes. Given that 5,621 kilometres had already been driven during the holidays, the tax authorities were right to impose additional payroll tax on the imputed income.
The director and major shareholder also stated that the car is not provided to him in the course of his employment. This is because he works for a sub-subsidiary through his holding company in return for a management fee. The car belongs to this sub-subsidiary.
The Court has dismissed this argument out of hand. As it is plausible that the car was made available with the holding company’s knowledge, the holding company must apply the additional tax liability.
Private use allowance
A similar situation arises at Court of Appeal of The Hague. In this case, the director-owner states that he pays for all the private kilometres he drives in his company car. The Court concludes that the imputed income rule must be applied, as more than 500 private kilometres were driven.
Nor may the director and major shareholder deduct the amounts paid to the private limited company as a personal contribution towards the additional tax liability. This is because he cannot provide sufficient evidence that he actually made the payments. He claims that the contributions were recorded in the current account, but has not provided any supporting documentation. Consequently, it has not been sufficiently established that the costs are borne by the director and major shareholder.