We previously informed you about the pseudo-final tax in our newsletter. This means that, starting in 2027, employers will pay a 12% tax on the list price when they provide a fossil-fuel passenger car that is also used for private purposes, including commuting. The aim of this measure is to encourage employers to switch to electric cars and thereby accelerate the electrification of their vehicle fleets. The bill in its original form contained a number of issues. The regulation is therefore being amended in several respects.
Excluding temporary replacement vehicles
An important change concerns the use of replacement cars. When a company car is temporarily replaced—for example, due to damage or maintenance—the replacement fossil-fuel-powered car will now be exempt from the pseudo-final tax for up to fourteen days. This prevents employers from facing additional costs in the short term, even though they are already committed to emission-free driving.
Limited Exemption for Occasional Use
To address concerns from the field regarding temporary transportation, the government is also introducing an additional exemption. Until January 1, 2031, employers may provide a fossil-fueled car once a year for up to seven consecutive days without incurring the pseudo-final tax. This exception is particularly relevant for situations such as rental cars or short-term replacement transportation, where full electrification is not always immediately feasible.
Exemption for driving school cars
A specific exemption will be introduced for driving schools. Due to European regulations, it is not always possible in practice to provide fully electric driving lessons, for example because the Class B driver’s license often still requires driving a manual transmission vehicle. Furthermore, strictly applying the pseudo-final tax would result in a significant administrative burden, as driving schools would have to prove that no private use is taking place. A targeted exemption addresses this issue.
Transitional provisions extended
In addition, the transitional arrangement for existing situations is being expanded. This arrangement, which applies to cars that were already made available before the measure was introduced, was originally set to expire on September 17, 2030. The end date is being moved to January 1, 2031. While this may seem like a limited extension, it prevents the provision from expiring in the middle of a fiscal year, thereby simplifying administrative procedures.
Clarifications
In addition to these changes, the government is also providing greater clarity on several aspects of the regulation’s application. For example, it has been confirmed that, in the case of international work, the pseudo-final tax aligns with the allocation of taxing rights as stipulated in tax treaties. Furthermore, occasional use of taxis is not considered to be the provision of a car, meaning that in such cases, no pseudo-final tax is due.
The guidelines also clarify how mergers and acquisitions are handled. In such situations, the transitional rules may remain in effect, as the new employer is deemed to take the place of the former employer.
No extension of transitional provisions when changing employers
One area where the government is not making any concessions concerns the transitional provision in the event of a change of employer, other than in the case of a merger or acquisition. As soon as a car is made available by a different employer, the transitional provision lapses. This also applies within a corporate group. According to the government, such an expansion does not fit within the framework of the regulation, which is explicitly designed as an employer tax. Furthermore, an exception would make implementation considerably more complex.
However, it remains possible to retain the transitional provision when the same employer makes the car available to another employee.
In conclusion
The proposed changes are welcome adjustments. It is also encouraging that the regulation has been clarified on a number of points. Nevertheless, the regulation remains an example of fiscal instrumentalism, with significant consequences for employers.
Would you like to know what these changes mean for your organization, your vehicle fleet, or your current lease policy? Or would you like to know how best to prepare for the new legislation? Please feel free to contact your Govers representative or the Payroll Taxes focus group at loonheffingen@govers.nl.