Court of Appeal of The Hague ruled on the question of what constitutes commuting in the context of payroll tax.
Declaration of no private use
The case concerns an employee with a company car. A “statement no private car use” issued, under which his employer did not add to the employee's pay for the private use of the car. Under this declaration, the employee is allowed to drive a maximum of 500 private kilometres with the car in a calendar year.
Mileage records show that the employee drove a total of 487 private kilometres in 2020. The employee is divorced. The mileage records record 19 trips between the employee's place of work and his partner's place of residence. The tax authorities count the kilometres driven in connection with these trips as private kilometres and impose a supplementary payroll tax assessment on the employee.
Definition
However, the employee argues that these journeys are commuting trips. For wage tax purposes, commuting kilometres are deemed not to have been driven for private purposes (note: this is different for VAT purposes). The Court considered that the Payroll Tax Act does not contain a definition of commuting. According to established case law, commuting occurs when:
- travelled between home or residence and work, and;
- the outward and return journeys take place within a 24-hour period.
The residence of the employee's partner is not the employee's residence. The Tax Court holds that the partner's residence is also not a domicile for the employee because he is not permanently resident there. The Court defines residence as: “a place available to and regularly occupied by a taxpayer”. Since the employee stays at his partner's residence 19 times in 5 months, staying there overnight and spending several weekends there, the residence qualifies as residence.
The Inland Revenue is also of the view that the second criterion is not met because, in some cases, the employee drives from his home to work on Friday and then from work to his partner's home. On the Monday, after spending the weekend with his partner, he drives from his partner's home to work. The court rejected the Inland Revenue's view that the 24-hour requirement was not met.
The court annuls the post-tax assessment.