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Car Allowance for Employees in Holland

One of the frequent issues that comes up with our clients is how to handle car allowances for employees on assignment, since for some positions a company provided car may be expected by your staff.  If you do offer a vehicle, it is necessary to know how the allowance will be taxed under the laws of the host country.

We had a client ask about car allowances in Holland, and what the local rules are for their expat staff.  Here is how we explained it:

The Basics: Company-Provided Car

The Employer

When you offer a car to an employee in Holland, the employer shoulders the cost of the lease, fuel, insurance and maintenance.  This arrangement is similar to many other countries, but there are differences in how the allowance is taxed in Holland on the employee end.

The Employee

For the employee in Holland (resident or expat) the car allowance is a taxable ‘benefit in kind’ that is added to salary.  The reason for this is that the employee will not have to pay for transportation out of their own pocket, so the car is actually a part of compensation.

The amount of the taxable benefit is based upon the car’s list price and the CO2 emissions, which determines whether it is ‘environmentally friendly’.  The taxable amount ranges from 7% to 25% depending on the emissions rate.

The good news for the employer is they get a VAT-correction for that taxable amount to the employee.

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Facts About Car Allowances for Use of a Personal Car in Holland

  • If an employee is using their own private car for business purposes, there is a mileage reimbursement of .19 Euros per kilometer, and this amount is tax free and not a benefit in kind.
  • If you reimburse more than the .19 Euros, that amount is taxable to the employee, as are fixed amounts that exceed that rate (such as a daily rate).
  • If fuel is reimbursed on top of the kilometer rate, that amount is also taxable to the employee.
  • Mileage reimbursement is also available for the commute from home to work, which is an unusual allowance but welcome by the employee.

Using an Employer of Record

Calculating car allowances and other benefits in kind are just one example of how Shield GEO makes international employment simple for our clients.  Our local employer of record is current with all of the tax rules for benefits and how to accurately calculate reimbursement for employee expenses.  This can be a time-consuming task for HR departments just entering a new country, and trying to comply with numerous employment and tax regulations. 

The Shield GEO service takes care of all payroll, immigration and employment related issues for you, so that your HR department can focus on supporting the business activity and performance of your employees on assignment.

Need help employing in Holland? Get in touch

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