In our article on the Private use of the car We are reporting on the rules that will apply from 1 January 2017 regarding the additional tax liability for the private use of a company car (for both business owners and employees).
As part of the parliamentary debate on the bill Act implementing Autobrief II State Secretary Wiebes states that he is convinced that existing cars cannot, after all, be brought under the 22% additional tax liability rate.
Taxable proportion
The additional tax rate is currently 25. However, lower rates of 7, 14 and 20 apply to (very) fuel-efficient cars.
From 1 January 2017, the standard additional tax liability percentage of 25 will be reduced to 22. Only zero-emission cars will then be subject to a lower percentage. This stands at 4% and applies to the car’s list price up to €50,000 (for amounts above this, the additional tax liability is 22%).
Zero-emission cars are cars that are powered entirely by electricity (whether or not using hydrogen). Hybrid cars are no longer eligible for a lower additional tax liability.
First registration number
The additional tax liability percentage to be applied is determined at the time the car is first registered. If this takes place in 2016, the additional tax liability for the private use of this car – which is not classified as fuel-efficient under the legislation – amounts to: 25%. With effect from 1 January 2017, this will be not reduced to 22%.
According to the State Secretary, this cannot be tampered with, as the date on which a car is first registered is linked to the car itself. This date does not change throughout the car’s lifetime. Generally speaking, other countries also record this information in the same way.
Of course, a lease contract running until September 2016 (if the car were replaced in 2016, the additional tax liability for the new car would be 25%) can be extended, so that the new car becomes available in 2017 (and the additional tax liability would be 22% – or 4%).
And a lease contract that runs until 2017 (or later) can be terminated early so that the 22% additional tax liability can be applied to the replacement car.
The consequences of extending or shortening lease contracts relate to the agreements between the employer, the employee and the leasing company. Naturally, the State Secretary does not interfere with those agreements.
Lower additional tax liability
If, prior to 1 January 2017, one of the aforementioned lower additional tax liabilities of 7%, 14% or 20% applied, that percentage will continue to apply for the 60 months following the month in which the vehicle registration number was issued. Thereafter, the additional tax liability will be determined on the basis of the rules in force at that time. In practice, this will mean that from month 61 onwards, the additional tax liability will be: 25%.
This is because the additional tax liability is not calculated using the general additional tax liability percentage of 22 per cent applicable at that time. This is due to the way in which the lower additional tax liability percentages are formulated in the law. The legislation does not state that the additional tax liability amounts to 7%, 14% or 20%, but rather that the additional tax liability of 25% is reduced by 18%, 11% or 5%. This reduction no longer applies once the 60-month period has commenced, meaning that the standard additional tax liability percentage applicable in the month in which the car was first registered applies.