When you drive a company car, you must pay benefit-in-kind taxation, even with short-term leasing. However, there are situations where you are exempt from this. This is the case when you drive less than 500 private kilometers per year or make a personal contribution to your employer. For individuals, there is no benefit-in-kind taxation. However, VAT is applicable.
What is benefit-in-kind taxation?
Benefit-in-kind taxation occurs when you use a company car for private purposes. The Tax and Customs Administration considers this as a form of non-cash remuneration. Therefore, taxation must be applied, similar to your gross salary. The amount depends on factors such as the list price and the CO2 emissions of the car. The more fuel-efficient the car is, the lower the benefit-in-kind tax rate.
Avoiding benefit-in-kind taxation with business short-term leasing
Of course, as a business driver, you want to minimize costs. But how can you avoid paying benefit-in-kind tax on your short-term lease? There are two options:
Less than 500 kilometers
The obligation to pay benefit-in-kind tax is waived if you use the company car for private purposes minimally. The limit is set at 500 kilometers per year. In this case, the employer can request a Declaration of No Private Use of the Car from the Tax and Customs Administration. This exempts them from any potential costs. As an employee, you must then demonstrate that you indeed drive less than 500 kilometers per year for private purposes. This requires meticulous mileage tracking, where you must record the following:
- Date;
- Initial and final odometer readings;
- Departure and destination addresses;
- Route;
- Private or business trip.
If you combine a business trip with a private matter, you must separately note the number of kilometers you detour for this.
Employee contribution
The employer can also ask you to make a contribution for your private kilometers. This contribution can be deducted from the benefit-in-kind tax. However, it is important that your employer clearly indicates the purpose of this contribution. Also, the benefit-in-kind tax for the entire year must not result in a negative amount.
No benefit-in-kind tax with private short-term leasing
If you, as an individual, enter into a short-term lease, you are not a business driver, and therefore, you do not have to pay benefit-in-kind tax. However, you are subject to VAT.
More information about benefit-in-kind taxation?
Benefit-in-kind taxation remains a complex topic. Would you like to know more about benefit-in-kind taxation and how it is calculated for your short-term lease? Feel free to contact us. You can reach us by calling 038-7200 880 or by filling out our contact form. We are happy to provide you with more information about the options.