Company car / Own car
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Company car / Own car Tax 2018 Tax
2 | Company car/Own car Content 1. Company car 1.1 Who are comprised 1.2 Calculation basis 1.3 Taxable value 1.4 Availability 1.5 Electric cars 2. Use of own car for business purposes 2.1 Own car 2.2 Transportation for business purposes 2.3 Tax-free mileage allowance 2.4 Set-offs 2.5 Documentation and bookkeeping 2.6 Reporting 3. Leasing 3.1 Low-taxed leasing cars 3.2 Flex leasing 3.3 Split leasing 4. Choice of company car scheme 4.1 Free app for more platforms
3 | Company car/Own car Making the choice of mileage allowance applying as of 1 January car (conclusion of binding purchase, rental or the age of the car by the number of months 2018. leasing agreement). from the month of the car’s first registration. optimum car solutions is a complicated matter 1. Company car The calculation basis does not change for a 1.1 Who are comprised company car (from the set of rules for new which requires profound Taxation of company car is triggered when the cars to the set of rules for used cars) – unless The original price The price of the car as new is the considerations and analyses. car is made available to the employee by an the car is actually traded (changes owner) at a car’s price including the registration employer for private purposes. Therefore, the time that is more than 36 months after its tax, VAT, costs of delivery and The big issue is whether it is an advantage to rules apply first o all to employees. A first registration. all usual equipment. There is have a company car at one’s disposal or cohabitant or spouse’s use of the company a distinction between usual whether it will be better to use one’s own car car does not trigger additional taxation. It is Purchase of a company car upon the expiry of equipment and extra equipment for business purposes with the possibility of only the employee who can have a company the leasing period is considered change of pursuant to the Registration Tax mileage allowance. A precise answer requires car at his/her disposal and consequently be ownership just like a sale-and-lease-back Act. considerable calculations and depends subject to taxation. agreement. If a company car is handed over on thorough knowledge of the rules and to an affiliated company, for instance as part Usual equipment means equipment practices of taxation of company car as well as The rules also apply to individuals who of a restructuring, it can be considered an subject to registration tax including the conditions for paying out a tax-free are members of or assistants for boards, actual change of ownership, whereas sale and extra equipment in e.g. cars used for mileage allowance when using one’s own car committees, commissions, councils etc. and repurchasing of the same car will not be campaigns, if the equipment is for business purposes. for self-employed who have chosen to apply accepted for tax purposes, unless the mounted by the manufacturer or the rules of the Business Tax Scheme. agreement can be justified clearly for the importer. Deloitte has developed an easily accessible business purposes. calculation model which on the basis of a few 1.2 Calculation basis Pursuant to the Registration parameters gives a very precise indication of Company car is a taxable benefit and the New cars (less than 36 months old) Tax Act extra equipment can be which choice will be the best in each concrete value is calculated as a standard percentage The calculation basis for new cars acquired exempted from the registration tax, situation. The model can be downloaded of the car’s calculation basis. It is the mere no more than 36 months after their first if the equipment is supplied and as an app from www.deloitte.dk and is also right of disposal that is taxed. The extent of registration is the original price of the car as mounted by the dealer according to described in section 4. private use is not important. new. This is called a date rule. After the first agreement between the dealer and 36 months the calculation basis is 75% of the the user, and the equipment is This publication contains a brief introduction The calculation basis depends on whether the original price of the car as new. This is called stated separately on the contract as to rules and practice for taxation of free car is more or less than 36 months old at the the month rule according to which the extra equipment. company car and payment of tax-free time when the employer acquires the calculation basis is reduced on the basis of
4 | Company car/Own car Used cars (more than 36 months old) The environmental charge comprises the Example: The calculation basis for used cars acquired annual vehicle excise duty (including special The car is registered the first time on 20 October 2015. As from October 2018, the calculation basis is reduced, no matter whether the car is delivered later on, e.g. in November/December 2015. more than 36 months after the first charge for diesel cars without a particle filter, registration is the employer’s purchase but exclusive of equalizing duty for certain DKK 2015 2018 2018 price including any renovation repairs diesel cars and extra charge for private use) x Jan-Sep Oct-Dec (opposite maintenance expenses). 1.5. Price of a new car (the original price) 480,000 480,000 480,000 When it comes to used cars there is no What is included in the taxable value Reduction, after 36 months - - -120,000 distinction between usual equipment and Operational costs when using a company car extra equipment. The calculation basis is the are included in the taxable value, and the Calculation basis 480,000 480,000 360,000 total purchase price of the car. employer can pay these costs without the 25% of 300,000 DKK 75,000 75,000 75,000 employee being taxed additionally. These 1.3 Taxable value costs are general operational costs, e.g. costs 20% of amounts above 36,000 36,000 12,000 The taxable value of company car is equal to: for petrol/diesel, insurances, vehicle excise + Environmental charge 6,750 6,750 6,750 duty as well as repairs and maintenance • 25% of the first 300,000 DKK of the (vehicle excise duty 4,500 DKK) including drive-on products such as oil, wash, calculation basis. windshield fluid etc. Taxable value per year 117,750 117,750 93,750 • 20% of the amount exceeding 300,000 DKK. Taxable value per month 9,812 9,812 7,812 Costs for garage, parking space, parking • Environmental charge. charges, ferry tickets, motorway charges, Irrespective whether the calculation basis is bridge toll and purchase of roof rack for skies, Employee’s self-payment the price of a new car, 75% of the price of a child seat etc. are not operational costs and If during the income year the employee has car does not reduce the taxable value. Costs new car or the purchase price, the thus not included in the taxable value. If the paid the employer – with net pay – that the employee pays himself/herself do in calculation shall always be based on the employer pays such costs, they will be treated for having the car at his/her disposal, principle not reduce the taxable value. amount of minimum 160,000 DKK. as taxable benefits which must be taxed the taxable value of company car will be However, if the employee pays for general separately. reduced by an equivalent amount within the operational costs, they can be reimbursed by Environmental charge year in question. It is not important whether the employer as an outlay according to The taxable value is increased by an the self-payment is paid by instalments over receipts submitted, or they can be set off environmental charge. The charge is not the year or as a one-off payment. Payment against the taxable value as a user charge, if included in the calculation basis, but is added after 31 December or to others than the the employer does not want to reimburse (directly) to the taxable value. employer who has provided the company them, see below.
5 | Company car/Own car If for instance the employee pays for petrol 1.4 Availability the most expensive one of the cars is taxed and the registration plates are handed over to abroad – or other general operational costs – If the car is only available for private use part during the actual month. the Danish tax authorities. they can be considered self-payments and thus of the year, the tax value will be reduced by reduce the taxable value of company car. It is, the number of months during which the car The same applies if an employee changes job 1.5 Electric cars however, a condition that: was not available to the employee. In this in the middle of a month and has a company An electric car is in principle comprised by the respect one month is a continuous 30-day car available from both workplaces. In this general rules on taxation of company car, if the period and not a calendar month. If for case the first employer must calculate and tax car is made available for private use. The costs • The employee submits the original receipts instance the car has been available for the the value of the company car for for electricity for recharging the car are to the employer. period 1 January to 20 June and 10 August to the whole month according to general terms included and treated in the usual way as costs • The employer books the amount as an 31 December, the employee must be taxed of and conditions. The new employer must also for petrol/diesel etc. operational cost and at the same time 11/12 of its annual value, because the period calculate the value of company car for the credits an equivalent amount as income in with no car available is more than 30 days, but whole month during which the employee Electric cars have been exempted from the form of self-payment in the company car less than 60 days. starts employment, but can against registration tax until the end of 2015, and the accounts. documentation set off the value of company calculation basis solely constitutes In case of an occasional loan of a company car car that has been reported by the previous the acquisition price including VAT. From 2016 Salary conversion the employee will also be taxed according to employer. to 2020 there is a gradual phase-in of It is insignificant whether a company car is the ordinary rules. This means that an registration tax on electric cars. included as part of the total remuneration employee must be taxed for a whole year, Storage/downtime insurance package or the employee contributes however, a deduction for the number of A frequently asked question is whether it is The extemption from vehicle excise duty on directly to the financing by accepting a whole months during which the car was not possible to avoid taxation of cars which are electric cars will not be continued, and excise general and actual salary reduction. available will be granted. This means that a either put for storage or which for instance are duty is due from 2016. loan/availability period of only a few hours covered by a downtime insurance. However, A reduction of the gross/cash salary is actually triggers taxation of the value of neither downtime insurance or dismounting If the employer pays costs related to the not considered a self-payment for tax company car for minimum one month (1/12 and deposit of registration plates with e.g. an installation of a power charger at the purposes, because it is not made with net of the annual value). insurance company are sufficient to avoid employee’s residence, the amount should be pay. Consequently, taxation will take place taxation of a company car. added to the “calculation basis”. according to the ordinary rules, and a salary In case of changing cars in the middle of a reduction can neither be set off against nor calendar month taxation of both cars should To avoid taxation of a company car it is reduce the tax value. in principle be triggered in the actual month. decisive that an effective “deprivation of the However, if both cars have not been available availability” has taken place, and this requires at the same time, it will be accepted that only in principle that the car is deregistered in CRM
6 | Company car/Own car 2. Use of own car for business purposes the parties have joint finances. A car that is When counting the 60 days, it is not important For 2018 the National Assessment If the employee uses his/her own car for registered in one of the parents’ name is also whether the transportation has been done by Council has determined these rates: business purposes, the employer can considered the son or daughter’s own car, when one’s own car, another person’s car or by reimburse operating costs by paying out a tax- it can be documented that the son or daughter is public transport. The decisive factor is whether • 3.54 DKK per kilometre for the first free mileage allowance. the actual owner of the car, has financed the the employee has transported himself/herself 20,000 kilometres purchase and pays the operating costs. between his/her residence and the specific • 1.94 DKK per kilometre beyond this On the contrary the employer cannot pay or workplace for more than 60 working days limit reimburse actual operating costs concerning 2.2 Transportation for business purposes within a preceding 12-month period. the employee’s private car without tax Legislation stipulates the following objective consequences. criteria for which kind of transportation If the employee has a transport pattern is considered transportation for business that implies transportation to so many The total annual number of kilometres If the employee has other expenses for e.g. purposes: different workplaces that it is not likely that driven in the income year referred to is bridge tolls, ferry tickets etc. in connection transportation between usual residence and decisive for whether the kilometres driven with transportation for business purposes, • Transportation between usual the workplace will occur for more than 60 justify the high or the low rate. the costs can, however, be covered by the residence and a workplace for up to working days within a 12-month period, the employer as outlays according to receipts 60 working days within the preceding transportation can be considered made for When the limit of 20,000 kilometres submitted. In order to have the expenses 12 months. business purposes. There is no direct for business purposes in the individual covered, it is a condition that the employee requirement to control that the rule has been calendar year is exceeded, the rate will • Transportation between workplaces. can show original receipts. complied with. The tax authorities can, be reduced. If an employee has several • Transportation within the same however, with future effect for up to 12 employers at the same time or during the 2.1 Own car workplace. months impose written orders that it should year, the 20,000 kilometre limit will apply to In order to obtain tax-free mileage allowance, it be documented that the transportation is each employer. is a condition that the employee drives in his/ actually business-related (e.g. by making This 60-day rule means that transportation her own car. mileage accounts). It is the actual number of kilometres driven will no longer be considered business-related during the calendar year which decides when an employee has driven from his/her “Own car” is a car that is registered in the 2.3 Tax-free mileage allowance which rate to be used. The mileage residence to a workplace for more than 60 employee’s own name. A car that is leased in Both Danish and foreign employers and allowance must thus be calculated on the working days within a period of 12 months. one’s own name (private leasing) is also assignors can pay out tax-free mileage basis of the rates that applied on the date of Therefore, the employee is no longer entitled considered one’s own car. A car that is allowance to the employee for transportation the transportation – even though the actual to a tax-free mileage allowance. registered in the spouse’s or the cohabitant’s in his/her own car for business purposes. payout will be made in the subsequent name is considered one’s own car as long as income year/calendar year.
7 | Company car/Own car If the employer pays out a tax-free mileage employer in connection with payout of tax-free The demand on employer control procedures 3. Leasing allowance by rates that are lower than the rates allowance. If concurrently with payout of means that the documentation must be If the employer leases a car and makes it stipulated by the National Assessment Council, allowance the employer has agreed with the completed carefully and that it must contain all available to the employee as a company car, the employee cannot deduct the differential employee to reduce his/her gross salary, show necessary information. the employee will be tax liable according to the amount between the allowance and rates. salary restraint or receive a lower salary at his/ same rules applying for cars owned by the her employment, the allowance paid out will In our opinion the conditions must be company. The calculation basis is determined If no allowance for transportation by one’s own be taxable. considered fulfilled, if the above items can be as if the car was purchased by the employer at car for business purposes is paid out, the identified through a salary/employee No. This the time of leasing the car. employee will instead be entitled to a tax 2.5 Documentation and bookkeeping means that if the name, CPR-number, rates deduction (according to the rules and by the In order for the employee to receive a tax-free and calculation are stated on the payslip, and If the car is leased no more than 36 months rates for transportation between home and mileage allowance, the employer must check the information about date, purpose and after the car’s first registration, the car will be work). the number of kilometres driven. address etc. is registered in an IT system, the valued on the basis of the price of a new car. If documentation requirements are considered the leasing agreement has been concluded If an allowance is paid out by rates that are The allowance must be settled by submitting a fulfilled. more than 36 months after the car’s first higher than the National Assessment Council document containing information about: registration, an estimated market value of the rates, the entire amount will be taxable as The employer must check the number of car at the time of concluding the agreement will • The recipient’s name, address and personal income, unless the amount is divided kilometres driven effectively, and therefore the be used as basis for the calculation. civil registration No. (CPR-number). at the time of payout and the part of the person approving the payout must be able to amount that exceeds the rates is treated as • The business purpose of the identify the destination stated. Stating a 3.1 Low-taxed leasing cars salary. In this case taxes should be withheld in transportation. company name or an in-house term is in Even though the rules of taxation of company connection with the payout. principal not enough. The exact address must cars are identical – irrespective whether • Date of the transportation. be stated. The voucher should be signed by the employer purchases or leases the car, 2.4 Set-offs • The objective of the transportation. the person checking them. it is, however, a fact that a car model with the Fixed monthly or annual payouts of mileage same equipment is often taxed lower, • Number of kilometres driven. allowance are taxable and considered salary. 2.6 Reporting if it is leased compared to a purchased car. This Mileage allowance is also taxable, if it is set off • Rates applied. Payout of tax-free mileage allowance must be is solely due to the fact that the leasing fully or partly against cash salary already reported to the tax authorities, and the companies (who own the car) can purchase the • Calculation of the mileage allowance. agreed upon. employer is liable to report the amounts paid car at a lower price than the price at which an out on a month-by-month basis to eIncome in employer can purchase it. The tax exemption is conditioned by the box 48. employee not having compensated his/her
8 | Company car/Own car In addition, the leasing companies have the Only leasing companies who lease out cars leasing agreements and mileage log are fulfilled: pays the costs related to business driving, possibility of only settling a proportional part commercially can apply the rule. Individuals a detailed and complete mileage log must be of the registration duty for the period that the cannot use the rules. Split leasing agreements made continuously, and it must cover the leasing agreement covers. This does, • Separate, written leasing agreements between actual kilometres driven split between however, not affect the taxation basis. 3.3 Split leasing the leasing company/employer and the business and private purposes respectively. Proportional calculation and settlement of the The model consists of two independent leasing leasing company/employee must be registration duty are often referred to as flex agreements: concluded. The leasing agreements must be Split leasing in practice leasing described in section 3.2 below. independent, and the parties must solely be The employer must in no way finance, be • One agreement between the leasing liable for their own obligations in relation to the liable for or guarantee the employee’s company and the employer which covers 3.2 Flex leasing leasing company. obligations via-à-vis the leasing company. working hours and transportation for In everyday speech flex leasing is the situation business purposes. • The employer has the preferential right to use where the leasing company has the possibility In order for the scheme to be practicable and of settling a proportional registration duty. • One agreement between the leasing the car during working hours, and the at the same time comply with SKAT’s terms Very often the model is described as company and the employee which employee has preferential right to use the car and conditions, it is required that each party continuous settlement of the duty, however, covers spare time and transportation for at other times (spare time). settles all operational costs (including costs for this is not correct. private purposes. • The lease payment and all operational costs petrol) proportionally and directly with the are for each of the parties settled directly with leasing company. In this way it is ensured that A very special rule makes it possible for The model is to ensure that the employer as well the leasing company. each individual scheme is divided effectively the leasing companies only to settle a as the employee pays exactly each their part of between the parties. proportional part of the total registration the total costs on the basis of a detailed mileage • The lease payment that covers the total duty. This is an exception from the ordinary log. operational costs, depreciation and interest Split leasing cannot be used for self-employed rules about payment of full registration duty payment is split proportionally between the businessmen, even though the Business Tax when the car is registered in Denmark for the As the employee pays all costs and bears the parties on the basis of the actual kilometres Scheme is applied, since the self-employed first time. The registration duty is calculated in financial risk regarding all private transportation, driven. businessman is one and the same legal the usual way, and subsequently the employer has not made company car • The leasing agreements are required to be person. If a leased car that is used for mixed the leasing company is charged with a available to the employee for private purposes. identical, so that each party pays exactly the purposes is kept out of the Business Tax proportional part – equivalent to the leasing Therefore, no taxation will occur according to the same amount per kilometre driven. Scheme, the actual costs for using the car for period. The proportional duty is, however, general rules of taxation of company car. business purposes can be refunded, and paid up front, and therefore the payment is Mileage log – split leasing consequently the model will in practice have not continuous. SKAT has approved the scheme provided that In order to ensure that the employer only the same effect as split leasing. the following requirements of the wording of
9 | Company car/Own car 4. Choice of company car scheme the other hand it can be an advantage for the • Petrol efficiency (how far does the car go per The choice between own car or company car employee to choose his/her own car, if a lot of litre). Our company car app can be usually attracts great attention. The basis for kilometres are driven for business purposes – downloaded free of charge from • Distance between home and work (for choosing company car or own car is primarily in particular if it is a low-price car – as the tax- www.deloitte.dk and is available for the calculation of lost mileage allowance, if any). the financial consequences for both the free mileage allowance rate is the same following platforms: employer and the employee. irrespective of the type of car that the • Transportation for private purposes. employee uses (new, used, lowprice or • Transportation for business purposes (for It is difficult to give a precise answer as to when expensive). calculation of the possibility of tax-free it is most financially advantageous for the allowance when using own car). parties to prefer the one model to the other as 4.1 Free app to more platforms it depends on each individual situation. Deloitte has developed an easily accessible The conclusion summarizes the most calculation model which on the basis of a few important assumptions and calculated For the employer it is most often a decisive parameters gives a very precise indication of amounts on which the calculations are based factor whether the costs are unchanged, which choice (company car or own car) is the in the concrete situation. Android irrespective whether a company car is made financially most optimum solution in the available to the employee or the employee concrete situation. receives a higher salary combined with tax-free mileage allowance when using his/her own car Our model makes the calculation on an for business purposes. assumption that the total annual costs for a company car scheme is financed by an For the employee it is important which solution equivalently lower salary, i.e. the choice iPhone/iPad is the most financially advantageous. This can between company car and own car is cost- be decided by making a calculation based on neutral for the employer. the price of the car, the mileage pattern and the time of the purchase etc. The calculations are based on the following concrete information which the user has to Typically the calculations will show that the provide: employee shall choose company car if the • The price of the car. number of kilometres driven for business PC Mac purposes is low compared to the number of • Calculation basis (which is most often lower kilometres driven for private purposes. On than the price).
10 | Company car/Own car Offices in Denmark Aalborg Kolding Silkeborg Østre Havnepromenade 26, 4. sal Egtved Allé 4 Papirfabrikken 26 9000 Aalborg 6000 Kolding 8600 Silkeborg Tel. +45 98 79 60 00 Tel. +45 75 53 00 00 Tel. +45 89 20 70 00 email@example.com firstname.lastname@example.org email@example.com Aarhus København Slagelse City Tower Weidekampsgade 6 Ndr. Ringgade 70 A Værkmestergade 2, 18.-21. etage 2300 København S 4200 Slagelse 8000 Aarhus C Tel. +45 36 10 20 30 Tel. +45 58 55 82 00 Tel. +45 89 41 41 41 firstname.lastname@example.org email@example.com firstname.lastname@example.org Aars Løgstør Nuuk Løgstørvej 14 Jernbanegade 21 Imaneq 33, 6.-7. etage 9600 Aars 9670 Løgstør 3900 Nuuk Tel. +45 96 98 23 00 Tel. +45 98 79 61 90 Tel. +299 32 15 11 email@example.com firstname.lastname@example.org email@example.com Esbjerg Odense Dokken 8 Tværkajen 5 6700 Esbjerg 5100 Odense C Tel. +45 79 12 84 44 Tel. +45 63 14 66 00 firstname.lastname@example.org email@example.com
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