Objection against VAT due on private use of company cars 2016
There are a number of cases currently pending before the Dutch Supreme Court that challenge the correctness of charging VAT on private use of company cars. In order to benefit from a potentially favourable outcome of these proceedings, we recommend that you file a timely objection against the last VAT return of 2016.
17 January 2017
An entrepreneur is in principle entitled to fully deduct VAT on costs incurred for his company cars, provided the cars are used for activities in respect of which a right to deduct VAT exists. At the end of the (financial) year, the entrepreneur has to declare the VAT relating to the value of the private use of the car. Before July 1, 2011, the levy of VAT on the private use of company cars was based on the notional addition for income tax combined with a deduction adjustment. As of July 1, 2011 VAT is being levied based on the system of a deemed supply. If an entrepreneur does not keep record of the annual amount of (private) kilometers, it has been approved that he can declare VAT the fixed adjustment of 2.7% of the listed price of the car (including VAT and private motor vehicle tax), or the fixed adjustment of 1.5% (if the entrepreneur was not able to deduct the VAT on the purchase costs of the car or if the car has been taken into use more than five years ago).
Many objections have been filed against the application of these new rules for private use of company cars as of July 1, 2011. Four lawsuits were submitted at the Gelderland District Court and the Arnhem-Leeuwarden Court of Appeal.
All of these cases relate to the year 2011 and present a large number of arguments, such as the question whether it is possible at all to apply two different regulations for a VAT levy on the private use of company cars in one calendar year, the question whether the new regulation may be applied to leased cars, and the question whether a VAT levy is justified in situations where employees pay a contribution for their private use. Unfortunately, both the Gelderland District Court and the Arnhem-Leeuwarden Court of Appeal ruled against the entrepreneurs concerned. The cases are currently before the Dutch Supreme Court. The Court is expected to pass judgment before May 1, 2017.
The Dutch Tax Administration recently announced that if an entrepreneur has already objected against the levying of VAT on private use of a company car in the last VAT return for 2011, 2012, 2013, 2014 or 2015, he does not have to file another objection relating to the last 2016 VAT return. The objection previously submitted automatically applies as an objection against the last VAT return for 2016.
If you have changed advisors recently or if have not filed an objection in these years yet and you still wish to do so, please use our standard notice of objection (in Dutch) or contact your advisor. Please consider the statutory term of six weeks after filing and paying the VAT return or, if you receive a refund, after receipt of your refund decision.
Although the outcome of the proceedings cannot be predicted with certainty, by filing an objection you secure your rights if the outcome is favourable (the Dutch Tax Administration will not refund any VAT paid in case you have not filed an objection). We will keep you informed as soon as the Dutch Supreme Court has passed its judgment.