Shared car

The Ministry of Finance published a policy document by the Payroll Tax Expert Group on 13 September on the tax consequences of employees using shared cars. As announced by the State Secretary for Tax Affairs and Tax Administration on 15 May earlier this year, the Payroll Tax Expert Group has now published a policy document with a number of examples to clarify the tax rules surrounding employees’ use of shared cars. Companies are increasingly offering employees the option of using a shared car. In practice, there is often a lack of clarity surrounding the tax treatment of this. In the policy document the Expert Group uses a number of practical situations to set out its view on how this should be handled for tax purposes. A couple of these situations is given below. The complete policy document with the other examples can be found here. These examples reflect the tax authorities’ view with simplified practical cases. Be aware that if your situation differs from the examples the result could well be different. If in doubt please contact your regular EY advisor.

Practical Example 1

An employer has a subscription with a shared car company. This subscription means that provided one is available, a car can be reserved. An employee needs a car to visit a client (for example, because the client may be difficult to reach by public transport). The employer books a car for the employee in the vicinity of a public transport station (or via a portal or online environment gives the employee permission to book a car). Private use is not permitted on pain of a fine. The employer checks that the car’s registered kilometres (shown on the invoice) are in agreement with the distance of the trip made by the employee. The employee cycles to a public transport station near to where he or she lives. The employee then takes the train to a public transport station in the vicinity of the customer. For the last part of the journey from that station the employee makes use of the shared car to drive to the client and return to the station.

Question

What are the payroll tax consequences of a trip using a shared car, public transport and bicycle?

Answer

Shared car: No company car has been provided for the following reasons:

• The employee can only use the car for the trip to and from the client.
•  During this trip the actual power of disposal (control) rests with the employer. The employee may well have the ability to drive the car but he or she cannot decide on the purpose for which the car is used. The car may only be used for a specific business assignment on behalf of the employer (i.e. the trip in question to the client) and the employer decides on that.
  The employer directly bears the cost of the car, making it "transport on behalf of the employer responsible for tax withholding". Given that the employee uses the car to visit a client, it is a business trip and therefore the actual costs of the car are untaxed.

Public transport: The employer can give the employee a tax-free kilometre allowance of up to €0.23 per kilometre for the public transport journey or reimburse the actual cost of the public transport tax-free where this is more.

Bike: The employer can grant the employee a tax-free kilometre allowance of up to €0.23 per kilometre for bicycle trips.

Practical Example 2

An employer has an agreement with a shared car company for all its employees. Under this agreement, provided a car is available, the employee can book it themselves (in the neighbourhood). The employees are permitted to book a car for business purposes at all times. Prior approval from the employer for the use of the car is not necessary, but private use is not permitted on pain of a fine. The employer checks for private use afterwards on the basis of invoices and keeps a record of this in the company’s admin files.

Question

What are the payroll tax consequences?

Answer

It is so that that a company car has been provided for the following reasons:

• The employee essentially has power of disposal (control) of the car during its use.
•  The employee can drive the car and can decide for what purpose they will use the car.

The employer does not issue any specific instructions regarding the use of the car for a business purpose. The employee may not use the car for private purposes, but could do so. Because checking only takes place after the event, the employer cannot prevent private use. The actual ban on private use means that the employer can prove that the car has been driven no more than 500 kilometres for private purposes on a calendar year basis (rule of rebuttal). The standard taxable benefit in kind of zero applies and any private use (i.e. up to 500 kilometres on a calendar year basis) will therefore be untaxed.