Income tax and car of the employer
If you drive a car of your employer, your employer must add a certain amount to your salary. This is because you derive benefit from private use of the car. The amount to be added is referred to as addition.
Calculation of addition
Your employer calculates the benefit derived from private use of the car on the basis of the list price of the car. The benefit varies between 4% and 25% of the list price and depends on the type of car. If your car is less harmful to the environment, the rate will be lower. Your employer withholds salaries tax and national insurance contributions from the addition, which reduces your net income.
Payment for private use
If you have agreed with your employers that you will pay a contribution for the private use of the car, that amount will be deducted from the addition. You then only pay tax on the reduced addition. If the contribution is higher than the addition, the addition becomes 0. It can never be a negative figure.
No taxation on limited private use
If your private use of the car does not exceed 500 kilometres per year, and you can prove this, your employer is not required to add anything to your income. For this purpose, you can apply to the Tax and Customs Administration for a ‘No private use of company car’ statement.
No taxation on company use only of light goods vehicle
If you have a company light goods vehicle and you do not use it for private journeys, your employer is not required to add anything to your income. For this purpose, you can apply to the Tax and Customs Administration for a ‘Business use only of company light goods vehicle’ statement.
Notifying the Tax and Customs Administration of changes
If anything changes in your situation, you should notify the Tax and Customs Administration as soon as possible. For instance, if your private use of a company car is set to exceed 500 kilometres per year, whereas it did not previously, you must notify both the Tax and Customs Administration and your employer.
If you have any questions concerning income tax, please contact the Tax and Customs Administration.