Fleet News

Dutch motoring tax

ALL new passenger cars and motorcycles in the Netherlands face an excise duty, BPM, that significantly increases their on-the-road price.
The BPM (Bijzondere Verbruiksbelasting op Personenauto's en Motorrijwielen) is levied when a car is registered in the Netherlands. The BPM is also due on cars that are not Dutch registered, but are used on a public road by a Dutch resident.
The person whose name is on a car's registration document is responsible for paying the BPM, although it is levied from the importer or manufacturer.
The BPM is levied on the net list price (list price without VAT and BPM) of a car, and therefore independent of the purchase price. For petrol-powered cars, the BPM rate is 45.2% of the car's pre-tax list-price minus €1,540.
The BPM rate for passenger cars powered by a diesel is also 45.2% but instead of a reduction of € 1.540, the BPM is increased by €328. But if the car is powered by a so-called 'clean' diesel engine the owner can reduce the BPM by €217.
If the car is not new at the time of its registration or use on Dutch public roads, the BPM due on a new car is reduced according to the scheme.
The percentage of the reduction remains 90% after nine years, although if the car is 25 years old, the reduction is 100%.
No BPM is refunded once the BPM is paid. So, no tax refund will be granted in case of the scrappage or export of a car.

Exemptions
No BPM is due on passenger cars used by the emergency services (police, fire brigade and ambulance) or on hearses.
In addition, if a car is used for 90% or more as a taxi, no BPM is due. Though all cars, mainly designed for the transport of passengers, are liable for BPM, none is due on, for example, the registration of a car with a double cab if its payload area covers a certain proportion of the car.

BPM and leasing
VAT is not charged on the BPM either in the supply of a new car or in the leasing of a car. For (operational) leasing, the BPM does not incur VAT if the following conditions are met:

  • The lease contract lasts at least one year.
  • The car must be registered in the name of the lessee (or driver).
  • The BPM must be fixed in a specific way (at the date of purchase of the car and at the end of the lease contract; the difference between the two fixed values must be divided by the lease period; at the end of the lease contract the BPM will be recalculated based on the actual lease period; this may result in a VAT payment if too much BPM had been recharged).
  • The calculated value of BPM must be itemised separately on the invoice.

    Road tax
    Road tax is levied on the 'holdership' (ownership) of a car. The holder of the car is the person or entity in whose name the car is registered.
    The tax-authorities can also regard the person or entity that more or less continuously uses the car, as the holder.
    The amount of road tax due is amongst others based on the car's weight (in kilograms). The amount of tax ranges from €11,62) for a passenger car weighing less than 500kg to €34,75 ) for a passenger car weighing more than 900kg (for each 100kg heavier than 900kg an extra charge of €9,35) is due, up to 3,300kg).
    All taxes due are on a quarterly basis, and every county in the Netherlands adds a small mark-up on road tax.
    This tax is increased with a 'brandstoftoeslag' (additional fuel tax) for diesel cars, and cars with dual fuel capabilities.
    For diesel, 'brandstoftoeslag' ranges from €44,29 to €80,56, with an additional €8,72 for each 100kg above 900kg.
    For cars not exclusively powered by either petrol or diesel, 'brandstoftoeslag' ranges from €51,96 to €90,57, with an addition of €9,60 for each 100kg above 900kg.
    But if a gas conversion meets certain requirements, the 'brandstoftoeslag' is nil for a passenger car weighing less than 800kg and €9,98 for a car weighing more than 900kg or more (with an additional €9,98 for every 100kg above 900 kg).

    Income tax and vat

  • Private use of company car and income tax
    There is no tax on the business use of a company car. The private use of the car on the other hand will in principle result in a taxable fringe benefit.
    The taxable fringe benefit depends on the total number of private kilometres driven during a year. A percentage of the list price of the company car must then be taken into account as a taxable benefit. The taxable benefit which must be calculated amounts to:
    Fringe benefit
    Private km; (% of the list-price)
    0–500; 0%
    500–3.000; 10%
    3.000–6.000; 15%
    6.000 - 8.000; 20%
    8.000+; 25%

  • Private use of company cars and VAT
    Initially a company can deduct all the VAT on the use of (leased) company cars (for example VAT on the purchase price of the car, VAT on petrol, repairs, maintenance, etc).
    But at the end of the year a VAT correction must be made for the private use of the company cars. The correction amounts to 12% of the fringe benefit for income tax. This correction must be incorporated in the last VAT return of the year.
    For a private person/entrepreneur the above mentioned correction is applied. For a company car put at the disposal of an employee, the employer must in principle apply the BUA (this concerns a limitation of deduction of VAT).
    For the BUA, the real use of the car is the starting point, and employers may use the 12% correction if the real use of the company car cannot be determined. In most cases, employers use the 12% correction.
    A taxable entity must also apply the 12% correction at the end of the year for its employees and for its director shareholders.
    Partners in a partnership often buy a car themselves and use the car for private and business journeys, receiving reimbursement for any business journeys. For the deduction of VAT on the use of cars, the partnership can use two different ways of determining VAT.
    The partnership considers the car as its own business capital. In that situation the partnership can deduct all the VAT in the beginning and must apply the 12% correction at the end of the year for the private use of the car.
    The partnership only pays a compensation to the partners for the use of cars.
    Since 1 October 2002 it is no longer possible to deduct 12% of the compensation that concerns the domestic business use of the car as input VAT.
    Employers are not entitled to recover VAT on reimbursement for commuter journeys to work.

    Financial and operational leases
    Difference between financial lease (hire purchase) and operational lease
    In the Netherlands, the finance lease and operational lease of a company car are not treated in the same way for VAT purposes.
    A financial lease (under the definition below) is treated as a supply of the car, which means that the lessor must pay VAT on the total sum of the lease rentals excluding the finance costs at the beginning of the lease period but including the option price.
    In this situation the lease is considered to be a sort of a hire-purchase agreement. An operational lease is treated as a service.
    The lessor must pay VAT on each lease rental including finance costs.
    The lease of a car is considered to be a finance lease (supply of goods) if the lease contract meets the following conditions:

  • The lessee has full use of the car (apart from restrictions necessary for the lessor's guarantee of the leased car, such as a prohibition for the lessee to let the car without the permission of the lessor).
  • From the start of the contract, the costs of use, maintenance, insurance and the risk of residual value changes or eventual scrappage of the car are for the lessee's account.
  • The lessee has an option to buy the car at the end of the lease period for a price (determined at the start of the agreement) that makes it reasonably obvious that the option will be exercised.
  • The lessee has the right to obtain the legal ownership by paying off the remaining lease terms (excluding finance costs) and option price at any desirable moment.
  • The agreement cannot be ended unilaterally during the lease period (unless the lessee pays advanced instalments).

    Accounting
    For accounting purposes a distinction needs to be made between finance and operational leases.
    Finance leased cars will be recorded as a fixed asset by the lessee at the acquisition cost (purchase price, production cost or assigned value) and depreciated as economically justifiable with respect to the nature of the asset (economic life).
    Operational leases will be recorded as a fixed asset by the lessor at the acquisition cost (purchase price, production cost or assigned value) and depreciated as economically justifiable with respect to the nature of the asset (economic life).

    Conclusion
    The VAT rate on the use and the purchase of cars is 19%. However, no VAT is levied on a part of the sale price that consists of the BPM (see left), both in the leasing and in the purchase price.
    Companies that are fully taxable for VAT can deduct all the VAT on the purchase and the lease of cars. Partially tax-exempted companies can only recover part of the VAT or none at all.
    A company that deducts VAT on the purchase or lease of cars (both passenger cars and vans) has to repay a part of the recovered VAT, if there is private (ie non-business) use of the car.
    The Dutch corporate tax-rate is 29% for the first €22.689 of profit, and 34.5 % for profits in excess of €22.689. The depreciation of cars and the running costs related to them are fully deductable from profits. Employees face a tax charge for the private use of a company car.
    A car must be legally registered either in the name of a private person living in the Netherlands or in the name of an entity that has its establishment in the Netherlands.
    Within two to three years, a pilot project will start in the western part of the Netherlands and around Utrecht on electronic account driving. Drivers who use certain roads during a certain period of the day will pay a toll.
    BPM is increasingly considered as an old fashioned tax that will probably be abolished within five years. Studies are also being carried out on how road taxes could be incorporated within fuel excise duty.

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