On December 20, 2011, the Deputy Minister of Finance published a decree that includes policy rules as well as approvals and concessions regarding the VAT adjustment for the private use of a company car that took effect on July 1, 2011. The Decree also includes rules on the deduction of VAT on Christmas gifts and the company purchase of bicycles made available to employees.
New adjustment method
As of July 1, 2011, the catalog price of the car will, in most cases, need to be adjusted by 2.7%.
A business must show, on the basis of legal provisions, to what extent the company car was used for private purposes and which costs are attributable to the company car. The Deputy Minister has approved the application of the deemed rate adjustment of 2.7% by businesses, in those cases where private use or the actual costs are not apparent from a business’ financial records. A comprehensive kilometer registration must provide proof of the actual private use. After all, an employee registers the kilometers in order to avoid the addition to income in the payroll tax. As the employer in most cases will not have access to this kilometer registration, it was decided to use the 2.7% deemed rate as starting point.
As of July 1, 2011, commuting is once again regarded as private use of a company car for VAT purposes. From January 1, 2008, through June 30, 2011, commuting was considered as business use of a company car. The deemed rate of 2.7% will therefore result in a reasonable outcome in situations involving considerable commuting.
Specific situations
The decree contains specific policy and approves a number of situations. However, some parts of the policy remain unclear.
Itinerant employees
Itinerant employees are only considered to commute if this involves driving from their home to a fixed business address belonging to the employer; which address was agreed on by the employer and employee. The fixed adjustment for itinerant employees will, therefore, often be too high. A separate concession has not been agreed on for itinerant employees.
Employees keeping a kilometer registration
The Deputy Minister has given a concession for employees holding a certificate for private use. In those cases, the VAT adjustment may be determined based on the number of days that the employee commuted multiplied by the distance commuted, in relation to the total kilometers driven in the company car. The employee does not have to keep a comprehensive kilometer registration.
The employer requires a payment from the employee for private use
If the employer requires that the employee pays for the private use of a company car (eigen bijdrage), VAT must be remitted on this payment by way of the periodic VAT returns. Approval has been given to dispense with this remittance if the VAT applicable to the actual costs for private use should be higher. In that case, the employer will have to apply the deemed rate adjustment of 2.7%.
If the VAT applicable to the payment requested from the employee is higher than the deemed rate adjustment, then the employer will owe VAT on that payment, and the deemed rate adjustment will not apply.
Car dealers and car rental companies
Car dealers and car rental companies often make cars worth different values available to employees. The Deputy Minister has approved the use of a non-weighted average catalog price when determining the adjustment for private use.
Car purchased without VAT
If a car has been purchased without VAT, for example from a private individual, the business can suffice by adjusting the catalog price of the car by 1.5%.
Parking spaces
The Deputy Minister has confirmed that businesses do not have to make a VAT adjustment for parking spaces made available to employees.
Bicycles
Businesses may deduct the VAT on bicycles purchased for employees if the purchase price, including VAT, is less than EUR 749. The Deputy Minister has approved a deduction entitlement for businesses if the payment from the employee (eigen bijdrage) is such that the amount the business has to pay is, on balance, no higher than EUR 749. The business must however pay the VAT owing on the payment made by the employee. If the business pays more than EUR 749 including VAT, then the VAT on the excess cannot be deducted.
Businesses that carry out exempted services and that do not require the employee to make a payment, or only require the employee to make a symbolic payment, are not entitled to a VAT deduction on purchased bicycles.
Christmas gifts
According to the Deputy Minister, businesses are only entitled to a VAT deduction for allowances and gifts that qualify as salary in kind, if they carry out taxable activities. As such, a business that carries out exempted activities is not entitled to a VAT deduction on Christmas gifts. In the past, businesses such as hospitals were entitled to a VAT deduction on Christmas gifts, if the advantage per employee remained under a threshold of EUR 227.