Avoid Dutch vehicle tax (BPM) and reduce motoring costs in the Netherlands with a German-registered company car?
Dutch vehicle tax on the purchase of a car in the Netherlands is a substantial amount. It makes buying a new car in the Netherlands more expensive than buying the same car in Germany. And, in certain circumstances, the addition to taxable income for private use of a company car is also lower in Germany.
In this article we discuss possible exemptions from BPM and the consequences of private use of a company car. However, it is important to note that this article simply provides a broad outline.
There are several types of exemption from BPM for cars with German number plates. These include an employee exemption, an entrepreneur exemption and an exemption for brief use of public roads in the Netherlands by vehicles with foreign number plates. These exemptions must be applied for before driving on public roads in the Netherlands.
Vehicles registered in another country by a company established in that country and placed at the disposal of an employee are exempt from BPM if:
- a) the vehicle is only used in the Netherlands by the employee or family members living with them;
b) the employer has issued a written statement confirming that the vehicle is intended to be used primarily for work outside the Netherlands (at least 70% of the mileage);
c) the employment contract does not, in principle, allow the employee to influence the decision regarding the country in which the vehicle is registered.
Under certain conditions, directors and majority shareholders are also eligible for this exemption, whereas policy-making employees may not be. It all depends on the legal structure of the company, the powers exercised by the persons concerned and the terms of the employment contract. If the various requirements are met, it is possible to apply for an exemption.
To qualify for the exemption, the entrepreneur must be employed by a foreign company and may have no influence over the registration of the vehicle. This means that, in principle, sole-traders and entrepreneurs who participate as an individual in a (general) partnership (or a similar type of enterprise incorporated under foreign law) are not eligible for the employee exemption. The same applies to directors and majority shareholders with a controlling interest.
The exemption for entrepreneurs may apply here.
Vehicles registered in another country used by Dutch residents operating outside the Netherlands as sole-traders, members of a partnership, or directors, partners or shareholders of a company who are not eligible for the employee exemption referred to above are exempt from BPM.
For the exemption to apply:
- a) the vehicle must only be used in the Netherlands by the entrepreneur or family members living with them,
b) a record of the mileage must show that the vehicle is used for business outside the Netherlands at least 50% of the time. However, this does not include the commuting distance.
The latter condition makes the entrepreneur exemption less advantageous than the employee exemption.
The vehicle must have a German number plate. So there needs to be a German company (such as a GmbH). If business activities are conducted in Germany without having a company there, it might be worth considering setting one up. Apart from avoiding BPM, there are other potential commercial and tax benefits.
Exemption for brief use
Vehicles registered in another country that are placed at the disposal of a Dutch resident or family members living with them or a legal entity established in the Netherlands and used on public roads in the Netherlands for no more than two weeks are exempt from BPM.
For this to apply, the exemption must not have been used during the preceding twelve months. This means that it is possible to rent a vehicle with a foreign number plate for two weeks a year without having to pay BPM.
Addition to taxable income for private use of a company car
In Germany, the addition to taxable income for private use of a company car is 1% of the (lower) list price in Germany per month. In other words, the basis of the tax assessment is 12% of the list price per year. This is less than the half the tax assessment basis in the Netherlands, which is 25% of the Dutch list price for most company cars.
The maximum income tax rate is also lower in Germany than in the Netherlands. And a salary split that divides taxable income between the Netherlands and Germany may reduce the tax one owes further still.
So, compared with the situation in the Netherlands, it would seem that considerably less tax is levied on German company cars.
Nonetheless, there are a few snags. In Germany, besides the 1% per month for private use of a company car, there is also an addition to taxable income for commuting, which is 0.03% of the list price multiplied by the number of kilometres commuted. In other words, a long commute may mean that the tax payable in Germany exceeds the tax payable in the Netherlands.
And if income is earned in both countries, the Dutch tax authorities may also decide to apply part of the addition to taxable income for private use of a company car. So it is best to proceed with caution. The fact that the vehicle has been made available by a company established in Germany must be well documented.
The overall conclusion is that a BPM exemption, possibly combined with a lower addition to taxable income for private use of a German-registered company car, can result in significant savings!