An employer was not permitted to recover from an employee the additional payroll tax levied by the Tax and Customs Administration in connection with the employee’s private use of a company car.
The case The case is being heard at the Limburg District Court and concerns a maintenance worker at a property management company. He has a company car at his disposal, which he also uses for private purposes. This was established during an audit by the Tax and Customs Administration, as a result of which the Tax and Customs Administration issued the employer with an additional assessment for payroll tax. The employer recovers this tax from the employee by deducting it from the employee’s net pay.
Permission?
The employee does not agree with this. He claims that he had his employer’s permission to use the company car for private purposes. This permission was in lieu of a pay rise. The employer disputes this and, as the agreements were not set out in writing, the employment tribunal cannot attach any legal consequences to them. The judge does, however, find that the employer was aware of the private use, but had never raised the issue with the employee between 2005 and 2022, had not requested a mileage log for verification and/or had not applied an additional tax liability.
Final tax
The magistrate’s court also finds that the Tax and Customs Administration imposed the additional assessment as a final levy. This is the normal procedure when income tax is assessed retrospectively. It means that the payroll tax is calculated on a gross basis, on the assumption that the employer will bear the cost of the tax. If the employer did not wish to do so, it should have requested the Tax and Customs Administration in advance to issue a “standard” additional assessment, in which the payroll tax is calculated at the single rate. Incidentally, this is only possible if the employer can, both legally and in practice, recover the tax from the employee. According to the subdistrict court, the employer has not demonstrated that the additional tax assessment can be attributed to the employee.
However, even if the employer had demonstrated this, the fact that it did not request a “standard” additional tax assessment from the Tax and Customs Administration means that it cannot recover the additional tax from the employee. The subdistrict court therefore does not allow the employer to provide further evidence.