Principle of equality does not result in lower VAT adjustment private use of company car
Publication date 16 April 2013
The Dutch Supreme Court has rendered judgment on the application of the lower VAT adjustment for the private use of environmentally friendly company cars. Between January 1, 2008, and July 1, 2011, this VAT adjustment was linked to the addition to income percentages for the personal income tax. These vary depending on the cars CO2 emission (25%, 20%, 14% or 0%). The Supreme Court has rejected such a differentiation in the VAT adjustment. However, according to the Supreme Court, the principle of equality does not allow for a lower VAT adjustment percentage to be applied to non-environmentally friendly cars for the period up to July 1, 2011.
Many businesses have filed notices of objection against the VAT adjustment for the private use of a company car. It is likely that the notices of objection relating to the period preceding July 1, 2011, will be rejected insofar as the objection is based on the principle of equality. However, businesses can still substantiate their notices of objection by referring to the approval/concession given for having the VAT adjusted based on the statistical method. The statistical method results in an adjustment of 26% or 27% (depending on the year) to the actual input tax. This method is often more advantageous than the application of the fixed amount for non-environmentally friendly cars (12% of 25% of the catalog price).
The Supreme Court acknowledges that the differentiation in the VAT adjustment percentage for cars that are and cars that are not environmentally friendly is contrary to Dutch VAT legislation and European VAT guidelines. However, contrary to the judgments rendered by the Haarlem District Court and the Amsterdam Court of Appeals, this contradiction does not mean that the lower VAT adjustment can be applied to every car. The Supreme Court concluded that this unequal treatment must be corrected by terminating the unlawful benefit for environmentally friendly cars. This has already been implemented in the new policy, effective as of July 1, 2011.
Situation as of July 1, 2011
As of July 1, 2011, an approval/concession has been given for calculating the VAT adjustment at 2.7% of the catalog price. This resulted in a large number of notices of objections being filed. This judgment has no bearing on these notices of objection.