Decree on VAT adjustment for private use of company car update

Publication date 23 July 2012

As of July 1, 2011, a fixed amount of 2.7% of the catalog price of a car can be applied in respect of the VAT adjustment for the private use of company cars. These rules have now been updated in a new decree that includes a number of clarifications and additional concessions, for example, an approval/concession has been given for a reduced fixed amount of 1.5%, to apply after the car has been used by the business for five years (including the year of first use). An overview of the most important changes is set out below.

Reduced fixed rate
One concession that had already been approved was a reduced fixed amount of 1.5% of the catalog price in respect of the VAT adjustment for private use, applicable to cars purchased without the business having been able to deduct the VAT, and that are used for private and business purposes.

The new decree contains an approval/concession, whereby the reduced fixed amount can also be applied to cars that have been used by the business for more than five years (including the year of first use). The reduced fixed amount has retroactive effect until July 1, 2011. It is not clear whether this approval/concession only applies to private cars, or also to lease and rental cars. For more information, please contact your VAT advisor.

Commuting
The old decree regarded travel between the place of residence and the workplace stated in the employment contract as commuting. The new decree notes that the frequency of this travel is irrelevant.

If the business activities require an employee to take the company car to their place of residence, for example because they are on-call, then we consider that, in certain circumstances, it can be argued that this must be regarded as business use.

Final VAT return for the calendar year/financial year
In anticipation of amended legislation that is to take effect as of January 1, 2013, an approval/concession has been given which allows businesses with a financial year that differs from the calendar year to report the adjustment in the final VAT return for the financial year. However, the financial year must not be longer than one calendar year. Please note that any notice of objection you may wish to file against the reported adjustment, must be filed before the applicable filing deadline has expired. Please consult your VAT advisor.

The legislation that is to take effect on January 1, 2013, obliges the taxpayer to report the adjustment in the final VAT return for the financial year.

Standard value
According to the decree, if the amount an employee has to pay for the private use of the company car is less than the standard value of having the company car being made available, then VAT must be reported in respect of the standard value. As practical problems can arise when determining the standard value, the decree contains an approval/concession, whereby the standard value is made up of the costs incurred by the business in respect of the car, including depreciation costs, to the extent that they are attributable to the private use of the car. An approval/concession had already been given to apply the fixed amount or the reduced fixed amount in this situation.