Tax Administration discloses processing method of objections relating to private use of cars
Last April we informed you about the Dutch Supreme Court rulings in the test cases on the private use of company cars. On June 1, 2017, the collective decision on the objection was published in the Government Gazette and a notification was published on the Tax Administration’s website on how objections relating to private use of cars are processed. This alert includes more detailed information.
6 June 2017
Supreme Court rulings
On April 21, 2017, the Netherlands Supreme Court ruled in four cases regarding VAT for private use of company cars. The cases show that the Dutch rules can be maintained. However, if taxable persons do not have kilometer records, the cases provide opportunities for establishing the private use in other ways, for instance based on statistic data.
Use of statistic data
In accordance with its previous ruling in the Van Laarhoven case, the Supreme Court also decided that the Netherlands may use a flat-rate scheme. The fact that this may in certain cases lead to more VAT payable than for the effective private use, does not mean that in those cases no VAT on the private use is to be levied at all. The VAT payable in such cases only needs to be reduced to an amount that corresponds with the effective private use.
If taxable persons do not have kilometer records, the Supreme Court argues that the extent of the private use can be determined based on a reasonable estimate. Statistic data can be used as a guideline, but use of such data is neither necessary nor decisive. The circumstances to be taken in to account for determining whether the private use has reasonably been determined are:
- the nature of the company;
- the business purposes for which the car can be used within the company;
- the position and the activities within the company of the person who uses the car; and
- what is known about how the car can or has been used for private purposes, such as for commuting traffic.
When statistic data is used, it should be demonstrated based on these circumstances that those statistic data can be used in the case at hand.
Processing method of notices of objection
Following the procedures, many taxpayers objected against their own VAT returns for the years 2011 up to and including 2016. The State Secretary has designated these objections as a collective objection. This means that the Tax Inspector can process the objections in a single collective decision.
On June 1, 2017, the collective decision on the objection was published in the Netherlands Government Gazette (“Staatscourant”). In this collective decision, the Tax Inspector declares the objections to be unfounded. However, if a notice of objection (implicitly) argues that the flat-rate scheme leads to excessive VAT on the private use, the objection is considered to be well-founded on this point. Entrepreneurs then have up to July 15, 2017 to supply data that enable determining which part of the company car-related expenditure can be attributed to their private use. For VAT purposes, commuting traffic qualifies as private use.
What can you do?
If you argue in your notice of objection that more VAT has been charged on you than would be due based on private use of your company car, you can substantiate and supplement your objection. The Tax Administration’s website provides for a form to be used.
Just completing the form will not suffice. The Tax Administration requires entrepreneurs to provide a complete substantiation and evidence. The notification by the Tax Administration shows that it will not be easy to demonstrate vis-à-vis the Tax Administration that you paid too much VAT due to application of the flat-rate. If statistic data is used, it should be demonstrated for each individual car why this data is useful in the case of the respective entrepreneur.
You have up to July 15, 2017 to substantiate your notice of objection by filling out the form and providing evidence. If you fail to do so, your objection will also be rejected on this point. You can, of course, contact your advisor to check whether it would be useful for you to provide additional information and to demonstrate that the flat-rate resulted in you paying too much VAT. You can also consult our guidance.