The changes will have a large impact as deducting VAT on both purchased and leased company cars will be strictly limited to their business use, with a maximum of 50 percent. Previously, a fixed 50 percent VAT deduction was always allowed.
‘Free’ company cars
The decision allows three methods to determine the business use of company cars which are put at employees’ disposal free of charge.
This method is based on actual kilometers driven for all business journeys for each individual car. VAT deduction is strictly limited to the business use. Commuting to and from work is classed as private use.
This method is based on a calculation for private use, which is combined with the actual distance traveled to give a percentage of private use. Private use is calculated by adding a notional figure of purely private use (6,000 km per year) with a figure for commuting. The commuting figure is calculated by multiplying the daily home-to-work distance by 200 working days:
This private use is then compared to the total of actually covered kilometers according to the milometer:
%private use = ((home-to-work*2*200) + 6000km)/total number of km
This method can only be applied by taxpayers with at least four vehicles. It must be applied to the entire fleet for at least three years.
Methods one and two can be combined within the same car fleet. Once a decision is made, the method must be maintained for that calendar year. In addition, annual adjustments must be made based on the actual business use.
‘Paid-for’ company cars
When employees make a contribution for the use of a company car, the deduction of VAT on all car expenses is fixed at 50 percent, and VAT must be paid on the contribution.
Before the contribution must at least equal the normal value. However, the normal value is no longer based on the benefit in kind for the purposes of direct taxation. From now on, the assessment base equals the actual expenses. The expenses made are calculated as the costs made, multiplied by the percentage of private use exceeding 50 percent. This implies that the business use must also be determined for such cars, using one of the methods mentioned.