Additional tax liability for private car use

If an employer makes a car available to the employee, the employee will be subject to additional tax liability for private car use if the following two conditions are met:

  • The car is used by the employee for private purposes for more than 500 kilometres per calendar year.
  • The employee receives a salary subject to payroll tax or income tax in the Netherlands. This applies both to employees resident in the Netherlands and those living abroad.

If the employee is subject to additional tax liability, it must be determined which additional tax liability percentage applies to the company car. This percentage is determined based on the date when the car was first registered in the Netherlands. If a car is currently registered in the Netherlands for the first time, a rate of 22% will apply in 2023. For fully electric cars, there is a limit, with a rate of 16% on a list value of up to €30,000 and 22% on any amount above that.

If an employee works in multiple countries, there may be a material or formal salary split. It is possible that the private car use benefit will then be taxed partially in the country of residence and partially in the country of work.

Vehicle registration tax & vehicle excise duty

Vehicle registration tax is the tax on passenger cars and motorbikes. Vehicle registration tax must be paid when you purchase or import a passenger car, motorbike or a van in the Netherlands. The vehicle registration tax payable is calculated based on the CO2 emissions in grams/km or the net list price. This article does not include details of the calculation method. However, we do discuss any possible exemptions you have as an employee or employer if you wish to use a motor vehicle with a foreign number plate in the Netherlands.

As well as the one-vehicle registration tax to be paid, you must also pay vehicle excise duty periodically, even if your employer is based abroad and has provided a motor vehicle with a foreign number plate.

Employee exemption

In order to qualify for the employee exemption for vehicle registration tax, you as an employee must meet all the following conditions:

  • You live in the Netherlands and work for a foreign employer.
  • Your employer provides you with a motor vehicle registered abroad.
  • Your employer declares in writing that the motor vehicle is mainly to be used for your work outside the Netherlands. Please note that this does not include the miles you drive between your home and your workplace. Evidence must be provided in the form of mileage records.
  • As an employee, you may not decide in which country the car or motorbike will be registered.

Furthermore, it is important that you apply for the employee exemption before you start driving the motor vehicle registered abroad within the Netherlands. The first three conditions mentioned also apply to the employee exemption for the vehicle excise duty to be paid.

Employer exemption

As a Dutch resident, you can apply for an employer exemption from vehicle registration tax for a motor vehicle with a foreign number plate. In addition to being the owner or holder of the respective motor vehicle, as an employer you must meet one of the following conditions:

  • You are the head of a sole proprietorship based somewhere other than in the Netherlands.
  • You are a member of a partnership based somewhere other than in the Netherlands.
  • You are a director, partner or shareholder of a company based somewhere other than in the Netherlands.

In addition, the following conditions apply:

  • You are not an employee of the company yourself.
  • Only you or your resident family members use the motor vehicle in the Netherlands.
  • The motor vehicle must be used outside the Netherlands for business purposes for at least 50% per calendar year. Please note that this does not include the miles you drive between your home and your workplace. Evidence must be provided in the form of mileage records.

The same conditions mentioned above apply when it comes to implementing the employer exemption for vehicle excise duty.

VAT on private car use

If your company purchases a car, the VAT on the purchase, maintenance and use of the car can be deducted. If the car is also used for private purposes, VAT must also be charged on the private use*. There are two options for this:

  1. VAT can be charged on actual private use if mileage records are kept.
  2. Instead of actual private use, it is also possible to opt for a flat-rate scheme in which VAT is 2.7% of the vehicle’s catalogue value, including VAT and vehicle registration tax.

Hint: in some cases, it is more advantageous to pay VAT on your actual private use. Please bear in mind that, in this case, commuting is considered private use.

*Incidentally, this adjustment does not specifically relate to cars with foreign number plates, but it is a point of interest with the car in the company.

Written by:

Belastingadviseur Dirk van Oosterbosch

Dirk van Oosterbosch MSc

Tax advisor and global mobility specialist