Tax Addition for Private Use of a Company Car

1. What is tax addition?

Tax addition, or bijtelling, is the fiscal regulation that applies when an employee uses a company car for private purposes. The Dutch Tax Authority (Belastingdienst) considers this a form of salary in kind. To ensure that private use of a company car is taxed, a percentage of the car’s catalog value is added to your taxable income. You will then pay income tax on this amount.

2. When does tax addition apply?

Tax addition applies when you drive more than 500 kilometers per year privately with the company car. Private use includes:

• Trips to the supermarket
• Visiting friends or family
• Vacation travel with the car

Note: Commuting (home to work and back) is not considered private use, unless you drive to a fixed work location outside the normal route.

3. How is the tax addition calculated?

The amount of tax addition depends on the type of car and its catalog value, including VAT and BPM (a Dutch car registration tax). The tax addition percentage is mainly determined by the car’s CO₂ emissions.

Standard tax addition:

• Conventional cars (with combustion engines): 22% tax addition based on the catalog value.
• Electric cars: In 2024, a reduced tax addition rate of 16% applies for electric cars, but only up to a catalog value of €30,000. For the amount exceeding €30,000, the standard rate of 22% applies.

Example:

If you have a company car with a catalog value of €40,000, and the tax addition rate is 22%:

• Tax addition = 22% of €40,000 = €8,800 per year
• This amount is added to your taxable income, increasing the amount of income tax you need to pay.

For electric cars, the calculation works slightly differently. For example, if you have an electric company car with a catalog value of €40,000:

• Tax addition on the first €30,000 = 16% = €4,800
• Tax addition on the remaining €10,000 = 22% = €2,200

In total, the tax addition amounts to €7,000 per year.

4. Exception: Less than 500 kilometers of private use

If you use the company car for less than 500 kilometers per year for private purposes, you do not have to pay tax addition. However, you must be able to prove this with a comprehensive trip log. This log must accurately record when and why the car was used for business or private purposes.

The Dutch Tax Authority may ask for this log as part of a random check, so make sure it is accurate and up-to-date.

5. Avoiding tax addition

Do you want to avoid tax addition entirely? This is only possible if you can prove that you do not use the car privately (or for fewer than 500 kilometers annually). There are a few options:

• Comprehensive trip log: Keep a detailed trip log of all business kilometers.
• Statement of no private use: Submit a “statement of no private use” (Verklaring geen privégebruik) to the Dutch Tax Authority. This is a formal declaration that you only use the car for business purposes. Be aware that the Tax Authority will periodically check whether this is being upheld.

6. Private use and personal contribution

In some cases, your employer may ask for a personal contribution for the private use of the company car. This amount can be deducted from the tax addition. For example, if you pay €1,000 per year for private use of the car, this amount is subtracted from the total tax addition.

Example with personal contribution:

If you have a tax addition of €7,000 and you pay a personal contribution of €1,000, the tax addition becomes €7,000 - €1,000 = €6,000.

7. What counts as private use?

In addition to visiting family or friends, private use includes vacation trips, grocery shopping, and detours on the way home. Commuting is officially not considered private use, but if you make a personal detour, this does count as private.

8. Conclusion

The tax addition for private use of a company car can have a significant impact on your net salary. It’s important to understand the rules and how to calculate the tax addition. If you drive less than 500 kilometers per year privately, you can avoid the tax addition, but be sure to keep a detailed trip log.

If you have specific questions about your situation or need help with keeping a trip log, contact your employer or a tax advisor to ensure everything is handled correctly and to avoid unnecessary tax costs.