Car leasing and the taxable addition

Frits Pieper
Aug 02 2018

If you also use a company car privately, you will have to deal with additional tax. Additional tax is an amount that is added to your taxable income and on which you pay income tax. The amount is calculated by taking a certain percentage – usually 22% – of the catalogue value of your car.

Additional charge for private use

You will be faced with an additional payment if you drive more than 500 km privately in a calendar year with your (business) lease car or company car. If you use the car purely for business purposes or stay below 500 km, the additional payment does not apply. The tax authorities see the private use of your business car as a benefit in kind, which is added to your taxable income. Are you considering leasing a car with a private lease? Then read more about how a private lease works in this blog.

Addition percentage

A certain percentage of the additional tax is used for the additional tax. That percentage depends on the CO2 emissions of your car. In fact, two percentages are currently used: 4 percent for cars with no emissions (read: fully electric vehicles and hydrogen vehicles) and 22 percent for all cars that do emit CO2. It does not matter how much the emissions per kilometer are exactly. Very black and white, if you ask us.

New rules

The rules for electric vehicles will change in 2019. Electric vehicles with a catalogue value of more than 50 thousand euros will then also be subject to the high additional tax rate of 22 percent.

Catalogue value

The percentage applies to the catalogue value of the car and the additional payment is fixed for five years. Although the percentage and the amount of the additional payment are fixed, the net additional payment can differ per individual case. This has to do with the different tax brackets and the associated tax percentage that applies. Someone who falls into a higher bracket pays more tax in percentage terms and therefore also in absolute terms.

Calculation example

Imagine you lease a Ford Focus with a catalogue value of 25.670 euros. Then 22 percent of this amount, or 5.647,40 euros, is added to your taxable income.

Suppose your taxable income is 20.000 euros. Then you fall into the first tax bracket and pay (2018) 36,55 percent tax. Because of your lease car, your taxable income increases to 25.647,40 euros. As a result, you 'suddenly' fall into the second tax bracket and pay 40,85 percent tax. Net, you will pay 40,85 percent on 5.647,40 euros in tax on your lease car over the next five years. That amounts to an amount of 2.306,96 euros: a hefty 190 euros per month.

Good to Know

When leasing a car, it is therefore interesting to see whether you will fall into a higher tax bracket. It is even more interesting to ask your employer about leasing a fully electric vehicle, because the additional tax is then only 4 percent. Because the additional tax is fixed for five years, it does not yet matter whether the catalogue value is more than 50.000 euros.

Finally, if you only drive your company car privately sporadically, it is important to stay below 500 km per calendar year and to keep a complete log of your journeys. Are you going to rent a car in the Born region from Adrem? Then of course you don't have to keep a trip log. How convenient!

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