The older the company car, the lower-cost the ride?
Employees who have the use of a company car have to live with the corresponding addition being made to their income, as prevailing legislation contains the tax fiction that a car made available for business purposes is made available as well for the employee’s private use. The regular addition for a 2017-registered vehicle amounts to 22% of the value, to be calculated on the basis of the car’s original list price inclusive of value-added tax and of passenger vehicle and motorcycle tax. Pre-2017 registered vehicles are subject to different rates. Having enjoyed a surge of popularity among the working population over the past few years because of the reduced tax addition, hybrid motor cars would appear to be losing their appeal owing to their having been reassigned to the regular tax addition bracket.
Statistics compiled by BOVAG, the Netherlands Union of Car Dealers and Garage Operators, show that company car users are increasingly leaning towards older vehicles because of the reduced addition to their income. Even though an inflated addition rate of 35% applies, the addition for private use of a 15-year old (or even older) car is calculated on the basis of market value rather than original list price, as is done for newer vehicles.
Company car: sample calculation
A quick Internet search yields a perfectly respectable Audi A6 boasting a 2.5 litre, six-cylinder diesel engine, an overall mileage of just under 112,000 and a price of 3,500 euros. The amount to be added to one’s taxable income works out at (35% of € 3,500 =) € 1,225 p.a. for this car, which boils down to just over € 100 a month. The car’s net cost for the driver’s private use – assuming that the 52% tax bracket applies – totals € 627 p.a. A comparison between this older car and a brand-new Audi A6 boasting a six-cylinder diesel engine shows that the latter would involve the list price of at least € 61,600 having to be taken into consideration, which would yield an addition to taxable income of € 13,550 p.a., or € 7,000-plus in net terms. The monthly lease price to be paid for the car – based on an annual mileage average of 12,500 (miles) – would work out at just under € 1,000 exclusive of value-added tax, as the sort of outlay that would cover the typically greater maintenance cost of an older vehicle used for business purposes.
Although we are aware that a comparison between a brand-new car and one that is 20 years old is like comparing apples and oranges, the exercise most certainly highlights the differences between the two scenarios.
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Dutch version: Liever een oude auto van de zaak?