VAT adjustment for private use of company car after 1 July 2011
The amended version of the VAT scheme governing the private use of a company car came into effect on 1 July 2011, and has since been subjected to District Court scrutiny on several occasions. The new scheme considers the private use of a company car as a service. One of the cases involved the question as to whether the value-added tax charge should be confined to the employee’s contribution towards the private use of the company car. The general rule stipulates that the taxable amount is formed by the consideration which has actually been received, which consideration is the subjective value of a particular performance. It is permissible, however, to put the taxable amount on par with the regular value in order to prevent tax fraud and tax evasion on condition that:
- there should be a close association between the entrepreneur and the recipient of the service,
- the value of the consideration should be less than the regular value, and
- the recipient of the service should not be fully entitled to tax relief.
An employment contract between an employer and an employee qualifies as such a “close association”. According to the District Court there could be a possibility of tax fraud being committed if the value-added tax charge remained confined to the employee’s own contribution. for which reason the scheme provides for the adjustment of the taxable amount to the actual value of the private is permissible.
The court case in question also involved the question being addressed as to whether the adjustment in connection with the private use of company cars for which no own contribution was being paid should remain confined to 3/184 where the second half of 2011 was concerned as the new legislation had not been published in the Netherlands Bulletin of Acts, Orders and Decrees until 29 December 2011, so that the adjustment would only apply to the final three days of the year. The Court dismissed this view, stating that rather than there being a question of a retroactive change in legislation, the only thing that had changed had been the method of computing the adjustment.