The Inland Revenue has published some examples to clarify the tax rules when employees use shared cars. These are seven questions and answers. If you are considering using a shared car, see if your situation is discussed.
Example 1: employer reserves car for a business trip
An employer has a subscription with a shared car company. With this subscription, he can reserve a car when it is available. One of its employees needs a car to drive to a customer (e.g. because it is difficult to reach via public transport). The employer reserves a car for the employee near the public transport station (or authorises the employee to reserve a car via a portal/online environment). Private use is not allowed under penalty of a fine. The employer checks that the mileage of the car (on the invoice) matches the journey made by the employee.
The employee goes by bicycle to a public transport station near him. The employee then takes the train to a public transport station near the customer. From that station, for the final leg, the employee takes the shared car to the customer and vice versa.
What are the tax implications for payroll taxes?
Share car:
There is no provision of a car for the following reasons:
- The employee can only use the car while travelling to the customer and back.
- During this trip, the actual power of disposal remains with the employer. While the employee has the ability to drive the car, he may not determine the purpose for which he uses the car. He may only use the car for a targeted business assignment by the employer (namely the particular trip to the customer) and the employer controls this.
- The employer bears the cost of the car directly, making it 'transport on behalf of the withholding agent'. Since the employee goes to a customer by car, it is a business trip and therefore the actual cost of the car is untaxed.
Public transport:
The employer can give the employee a untaxed mileage allowance of up to €0.23 per kilometre for travelling by public transport, or it can give the actual costs of public transport untaxed if they are higher. If the employer has reimbursed, provided or made available a public transport pass, the pass is untaxed.
Bike:
The employer can give the employee a tax-free mileage allowance of up to €0.23 per kilometre for travelling by bicycle.
Example 2: employer has subscription with employee share car company
An employer has an agreement with a shared-car company for all its employees. Based on this, the employees can reserve a car (nearby) themselves when available. Employees may reserve a car for business purposes at any time. No employer approval for the use of the car is required beforehand, but private use is not allowed under penalty of a fine. The employer actually monitors private use afterwards through invoices and keeps records of this monitoring in its records.
What are the tax implications for payroll taxes?
- A car has been made available for the following reasons. The employee has actual power of disposal over the car during its use. He has the ability to drive the car and can determine at his own discretion the purposes for which he uses the car. The employer does not give a specific business instruction for the use of the car. The employee is not allowed to use the car privately, but can do so. Since the control takes place afterwards, the employer cannot prevent private use.
- The real ban on private use allows the employer to prove that the car is used for private purposes for no more than 500 kilometres on a calendar year basis (rebuttal rule).
- The flat-rate addition of nil applies and any private kilometres (i.e. a maximum of 500 kilometres on a calendar year basis) are therefore untaxed.
Example 3: employee has subscription with shared car company / use single ride
An employee privately takes out a subscription with a shared car company. This subscription allows him to reserve a car (nearby) when available. The company charges the employee a monthly subscription fee and an hourly and per-kilometre fee for the actual use of the car. All charging, fuel and insurance costs are included in the hourly/mileage rate.
At the employer's request, the employee reserves a car in his neighbourhood for one day to travel with it to a conference and back. The employer reimburses all costs charged by the car sharing company, consisting of the pro rata cost of the subscription, the use of the car for the business trip and the related charging or fuel costs. Private use during the drive to the congress is not allowed. The employer will check this afterwards.
What are the tax implications for payroll taxes?
There is no provision of a car for the following reasons:
- The employee can only use the car during the journey to the conference and back.
- The employer reimburses all costs of the car that see to the congress attendance. Such reimbursement can be equated with a car provided. However, this is not at issue in this case, because during this trip, the employee is not allowed to determine the purpose for which he uses the car. The actual power of disposal remains with the employer, as the employee may only use the car for a targeted business assignment by the employer (namely going to the congress) and the employer controls this.
- The employer can give a untaxed reimbursement for the cost of travelling to the congress of up to €0.23 per kilometre. If the actual costs are more and the employer chooses to reimburse the actual costs, the excess is taxed. The employer can designate the additional reimbursement as a final taxable item.
Example 4: employee has subscription with company shared car / use as needed
An employee privately takes out a subscription with a shared car company. This subscription allows him to reserve a car (nearby) when available. The company charges the employee a monthly subscription fee and an hourly and per-kilometre fee for the actual use of the car. All fuel and insurance costs are included in the hourly/mileage rate.
The employee has permission from his employer to use the car if, in the employee's opinion, it is necessary for work. Some degree of private use is allowed; the employer does not otherwise check. The employee does not keep trip records. The employer reimburses the employee's bill to the shared car company on a monthly basis, which means all costs, consisting of subscription costs, trip costs and fuel costs even if the employee uses the car for private purposes.
What are the tax implications for payroll taxes?
A car has been made available for the following reasons:
- The employer reimburses all costs of the car. Such reimbursement can be equated with a car made available (wage in kind). This is at issue in this case because the employee has actual power of disposal over the car during use. He has the ability to drive the car and can determine at his own discretion the purposes for which he uses the car. The employer does not give a specific business instruction for the use of the car and does not control the (private) use of the car.
- If the employee does not have access to a car at all times (because the shared cars are in use by others, for example), the scheme applies only for the periods when the employee has reserved the car.
The employer has to take into account an additional taxable benefit because it cannot meet the rebuttal rule. The employer cannot prove that the car is used for private purposes for no more than 500 kilometres on a calendar year basis. After all, he cannot submit a conclusive mileage record or otherwise prove that the 500-kilometre limit has not been exceeded.
When the employee uses different cars, the basis for the addition (catalogue value) is not always the same. The employer must take this into account when determining the amount of the addition. The employer can use the registration number to find out the catalogue value of the car. The details of the used car are listed on the invoice. Example 5 explains the calculation of the addition with a numerical example.
Example 5: employer offers shared car through mobility budget
An employer provides employees with a mobility budget of €800 per month. The employee can use this budget via an app for business travel. Among other things, the app allows the employee to reserve a car at a car rental company. The car rental company always has a car available for the employee. The employee may use the budget and thus the car only for business trips. If he does use the car for private purposes, the car rental company invoices the costs directly to the employee. The employer does not check the (private) use of the car. Any remaining budget is not paid out to the employee.
What are the tax implications for payroll taxes?
A car has been made available for the following reasons:
- While using the car, the actual power of disposal lies with the employee. After all, the employee has the ability to drive the car, and can decide at his own discretion the purposes for which he uses the car. The employer does not give a specific business instruction for the use of the car and does not control the (private) use of the car. Splitting the billing of business trips to the employer and private trips to the employee does not make this any different.
- The employee cannot have access to a car at all times. This is because the employee can only use the app up to a certain budget. Therefore, the scheme applies only to the days when the employee reserves a car through the app.
A flat-rate addition of nil is at issue if it turns out that the car is used for private purposes for no more than 500 kilometres on a calendar year basis (rebuttal rule). The 500-kilometre limit for private use must be recalculated according to the extent of disposal. If an employee uses the app for a car for 10 days a year, a limit of 13.6 kilometres (10/365) in that calendar year applies to him. For more private kilometres in that calendar year, the employer has to take into account a (time-limited) addition. In principle, this means (assuming that the same car is always used) an addition of 10/365 * (addition percentage * catalogue value). Suppose the employee has a car with a catalogue value of €50,000 with an addition percentage of 22%. The addition for the relevant calendar year is then rounded to €301 (10/365 * (22% * €50,000)). If the catalogue value of the shared cars differs, this must be taken into account. Suppose the employee had access to a car with a catalogue value of €30,000 for 5 days, a car with a catalogue value of €40,000 for 2 days and a car with a catalogue value of €50,000 for 3 days. The calculation of the addition in that case is: 5/365 * (addition rate * €30,000) + 2/365 * (addition rate * €40,000) + 3/365 * (addition rate * 30,000).
If no additional allowance has to be taken into account because no more than 13.6 kilometres were driven for private purposes, the private kilometres are valued at nil (flat-rate addition of nil).
Example 6: employer rents a car for three employees
An employer rents a car from a car rental company. The key to the car is held by the reception and is alternately used by three employees. The employer does not monitor the use of the car and private use is allowed. No mileage records are kept.
Employee A uses the car 45 days in the calendar year, employee B uses the car 60 days and employee C uses the car 100 days (total: 205 days of actual use). The car has a list value of €45,000.
What are the tax implications for payroll taxes?
A car has been made available for the following reasons:
- Employees have actual power of disposal over the car. They have the ability to drive the car, and can determine the purposes for which they use the car. The employer does not give a specific business instruction for the use of the car and does not control the (private) use of the car.
- Employees can have access to a car on a continuous basis with the understanding that the three of them have to share it. Therefore, days when the car is not actually used also count. Indeed, the scheme applies to the days the employee can use the car.
The employer must take into account an additional taxable benefit because the employer cannot prove that the car is used for private purposes for no more than 500 kilometres on a calendar year basis (rebuttal rule).
The employer must reasonably divide the additional taxable benefit proportionally among the three employees. The total additional taxable benefit for the car is €9,900 (22% * €45,000). For example, the addition can be divided among the relevant employees as follows:
- Employee A: €2,173 (45/205e* € 9.900)
- Employee B: €2,897 (60/205e* € 9.900)
- Employee C: €4,829 (100/205e* € 9.900)
Example 7: employer has one company car for three employees
An employer has one car on its premises that three employees can take for business use. The employer is fine with the employees also using the car for private purposes at times when the car is not reserved by the respective colleagues. However, the employer does not want to bear the cost of the private trips himself. He agrees with the employees that they have to pay for any private use themselves. A computerised trip registration system is installed in the car, making it possible to determine who drove the car when, where and for what purpose (business or private).
Employee A uses the car 60% and employee B 40%. Employee C does not use the car as it is in continuous use by the other two employees.
What are the tax implications for payroll taxes?
A car was made available to A and B for the following reasons:
- A and B have actual power of disposal over the car. They have the ability to drive the car and can determine the purpose for which they use the car. The employer does not give a specific business instruction for the use of the car and does not control the (private) use of the car.
- C does not have the ability to use the car; as it is always in use by the other employees. As a result, he does not actually have power of disposal over the car.
A flat-rate addition of nil is at issue for employee A and B if it turns out that the car is used for private purposes for no more than 500 kilometres on a calendar year basis (rebuttal rule). The 500-kilometre private use limit must be recalculated according to the extent of the car being made available. Since employee A uses the car 60% of the time, a limit of 300 kilometres (60% * 500) applies to him. For employee B, a limit of 200 kilometres (40% * 500) applies. For more private kilometres, the employer must take into account a proportionate flat-rate addition.
Suppose A has used the car for private purposes for more than 300 kilometres, then a proportionate flat-rate addition of 60% * (addition percentage * catalogue value) applies to him. If B used the car for 200 kilometres or less for private purposes, a flat-rate addition of nil applies to him.
Any personal contribution for the private use of the car may be deducted from the flat-rate addition.
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