Taxable benefit for private use of a car – rules coming into force in 2017

As this is a lengthy memo, we advise you to pdf-format.

With effect from 1 January 2017, the measures set out in the Autobrief II Bill in force.

When deciding whether to buy a new or second-hand car or van, a number of factors come into play. In the case of a company car, one of these is the additional tax liability – added to the business owner’s profits or the employee’s salary – for the private use of the car.

This note first sets out the rules for the additional tax liability, as they apply from 2017 onwards. We then explain the transitional arrangement. In doing so, we assume that the driver of the car is unable to prove that the car is not used, or is used only very little (500 kilometres or less), for private purposes.

New tax assessment percentages

From 1 January 2017, for the purposes of calculating the additional tax liability relating to the private use of a car for the purposes of income tax and payroll tax, there will be only two categories of car:

The additional tax liability is calculated on the basis of the catalogue value of the car and amounts to at least these percentages. If the tax authorities can prove that the actual value of the private use is higher, that actual value is added to the calculation.

There is a third rate as well. For cars that are 15 years old or older (youngtimers), you must 35% are added. The basis for this addition is the market value.

Only a fully electric A powered car has a CO₂-emissions of zero. Consequently, only these cars are eligible for the low additional tax liability of 4%.

A hybrid A hybrid car is partly powered by an internal combustion engine and therefore emits CO₂-emissions. Apart from the transitional arrangement, the general additional tax liability percentage therefore applies to these cars: 22%.

Teslatax

From 1 January 2019, the 4% additional tax liability applies without restriction only to cars in which electricity is generated using hydrogen. For cars in which electricity is generated by means other than hydrogen, the 4% additional tax liability applies to the list price up to €50,000. For the list price above that amount, the additional tax liability is 22%. This is now also commonly known by the popular term “Teslatax”.

Example 1

For a Tesla with a list price of €100,000, the additional tax liability would then be:

4% * € 50.000 = € 2.000

22% * € 50.000 = € 11.000

Total € 13.000

Basic additional tax rate and allowance

To fully understand the transitional arrangement, it is important to note that the additional tax liability percentages for cars less than 15 years old are laid down in law as a basic additional tax rate, less a discount.

From 2017, the basic additional tax rate is: 22% (for 2017: 25%). Only for cars with a CO₂-emissions of zero will result in a discount of 18%. The actual additional tax liability percentage for these cars is therefore (see above): 22% -/- 18% = 4%.

Transitional arrangement

The decisive factor in determining the additional tax liability percentage to be applied is the ddate of efirst ttitle (DET) of the car (even if it was first registered abroad).

The transitional arrangement applies solely to the applicable discount. The basic additional tax percentage remains unchanged at the rate that applied at the time the car was first registered.

For all cars, including those with a DET issued before 1 January 2017, a (transitional) period of 60 months applies, commencing on the 1st^e the day of the month following the month in which the vehicle was first registered. During this 60-month period, the discount applicable on the day of the DET remains in force for the vehicle. Once the transitional period has ended, the discount applicable to the vehicle in question at that time must always be applied.

The transitional arrangement is linked solely to the car, not to the owner and/or driver of the car. Under previous transitional arrangements, it was important that the car remained with the same owner and/or driver.

For cars first registered before 1 July 2012, the discounts of 11% and 5% (the additional tax liabilities of 14% and 20% respectively) remained in force until 1 January 2019.

Summary

• With effect from 1 January 2017, the basic additional tax rate is: 22%.
• Discount on a fully electric car: 18% (additional tax liability 4%).
• The reduction in the additional tax liability percentage is determined for all cars on the basis of the car’s DET and applies for the following 60 months. After that, the reduction percentage in force at that time applies.

Example 2

A very fuel-efficient car was registered on 30 June 2016. Basic additional tax liability: 25%, discount 10%, additional tax liability 15%.

The discount will be removed from the law with effect from 1 January 2017, but will continue to apply to this car under the transitional arrangement until 30 June 2021 inclusive. From 1 July 2021, the additional tax liability will be: 25% (NOT 22%!).

Example 3

A fuel-efficient car was registered on 31 December 2011. Basic additional tax liability: 25%, discount 5%, additional tax liability 20%.

The 60-month transition period ends on 31 December 2016, but under the special transitional arrangement, this car will continue to benefit from the 5% reduction in the additional tax liability until 31 December 2018 inclusive (the additional tax liability remains at 20%).

With effect from 1 January 2019, this will become 25%.

View vehicle details

On the RDW website (www.rdw.nl) Non-personal vehicle details for any car with a Dutch registration number can be accessed free of charge. All you need is the car’s registration number.

You won’t find the taxable value percentage here, but you will find the CO₂ emissions specified in the type-approval₂-emissions of the car, on which the reduction in the basic additional tax liability percentage is based. You will also find here, amongst other things, the DET and the catalogue value of the car (for cars with a DET issued after 31 December 2009).

After 2019

The government plans to phase out the tax relief on the additional tax liability for electric cars. As electric cars become more widespread, there is less need for tax incentives. It seems that this will take the following form:

The purpose of this note is to outline a scheme. For the sake of readability, matters have therefore been simplified. VWG is not liable for the consequences of actions taken or not taken as a result of this memorandum.