Is private use permitted when leasing an electric company car?
More and more business owners are opting to lease an electric company car. This is understandable: low additional tax liability, lower fuel costs and a sustainable image for your business. But as soon as you start using that car outside working hours, the question quickly arises: is that actually allowed, and what are the consequences? Private use of a leased electric company car is a subject about which there is a great deal of confusion, both from a tax and a contractual perspective.
In this article, we answer the most frequently asked questions about using a leased electric company car for private purposes. From tax rules and the terms of your lease agreement to keeping accurate records of your mileage: this will ensure you know exactly where you stand.
Are you allowed to use a leased electric company car for private purposes?
Yes, private use of a leased electric company car is permitted in most cases, but it has tax and contractual implications. Whether it is actually permitted depends on the terms of your lease agreement and who the car is registered to. If the car is registered in the company’s name and you also use it privately, you will have to pay additional tax.
In the Netherlands, the basic principle is that a company car may also be used for private purposes, unless you can prove that you do not do so. You provide this proof by keeping a comprehensive log of your journeys. If you cannot prove that you use the car for private purposes for less than 500 kilometres a year, the Tax and Customs Administration will automatically add an imputed income to your taxable income.
For electric commercial vehicles The same basic rules apply as for other company cars, but the additional tax liability percentages differ. This means that private use of an electric lease car has different financial implications than that of a traditional petrol or diesel car. You can read more about this in the following section.
What are the tax implications of private use when leasing an electric car?
If you use a leased electric company car for private purposes, you pay additional tax on the list price of the vehicle. For fully electric cars, a reduced tax-inclusion rate of 16% applies to the first 30,000 euros of the list price and 22% to the amount above that. This rate is set annually by the government and is subject to change.
How does the additional tax liability work in practice?
The additional tax liability is an amount that is added to your taxable income. You pay income tax or corporation tax on that amount, depending on your legal form. For example: you drive an electric company car with a list price of 45,000 euros. You would then calculate the additional tax liability as follows: 16% on 30,000 euros is 4,800 euros, plus 22% on the remaining 15,000 euros is 3,300 euros. The total additional tax liability is therefore 8,100 euros per year.
The advantage of an electric car over a petrol or diesel car is clear: for a conventional company car, an additional tax liability of 22% applies to the full list price. The lower additional tax liability for electric vehicles makes private use more attractive from a tax perspective. Nevertheless, it is always worth working out the exact costs in consultation with your accountant or tax adviser.
What if you also use the car for business purposes?
The additional tax liability applies regardless of how much you use the car for business purposes. As soon as you drive more than 500 kilometres a year for private purposes, the full additional tax liability applies. There is no sliding scale based on the percentage of private use. This means that, depending on your personal circumstances, it may be financially advantageous to use the car strictly for business purposes and to drive a separate private car.
What does a lease agreement say about private use?
A lease agreement usually states explicitly whether private use is permitted and under what conditions. Most operational lease agreements allow private use, but charge a higher mileage rate or a higher monthly lease payment for it. Some contracts restrict private use to the Netherlands or the Benelux, whilst others also allow journeys abroad.
When reviewing your lease agreement, please note the following points:
- Kilometre limit: How many kilometres per year are included, and how much does each additional kilometre cost?
- Geographical restrictions: Are you allowed to drive abroad, and if so, as far as where?
- Excess in the event of a claim: Is there a different excess for damage caused whilst the vehicle is being used for private purposes?
- Prohibition on private use: Some business lease agreements explicitly prohibit private use, for example in the case of certain tax arrangements.
- Restrictions on directors: Is your partner or a family member also allowed to drive the car?
Different rules apply to finance leases or hire purchase than to operating leases. In such cases, you are responsible for insurance and maintenance, and you largely determine the terms of use. Always check your own contract and, if in doubt, contact your leasing company or adviser.
How does private use differ between an electric company car and a conventional company car?
The main difference between private use of an electric company car and a standard company car lies in the additional tax liability and the running costs. An electric company car has a lower additional tax liability percentage, which makes private use more tax-efficient. In addition, the cost per kilometre is lower due to electricity being cheaper than fuel.
Tax differences
As described earlier, you pay a lower additional tax rate for an electric company car than for a petrol or diesel car. For conventional vehicles, an additional tax liability of 22% applies to the full list price. The difference can amount to hundreds or even thousands of euros per year, depending on your tax bracket and the value of the vehicle.
Practical differences
Private use of a company electric car also involves practical considerations. Take charging the car, for example: charging at home is cheaper than using public charging points, but requires a charging point. Who pays for the installation costs and the electricity used at home? Many electric vehicle lease contracts include provisions regarding charging card fees or home charging solutions.
In addition, an electric company car generally has a shorter range than a comparable petrol or diesel car. For private journeys over longer distances, such as holidays, this is something to bear in mind. You should also check whether your lease contract covers or reimburses fast charging at holiday destinations.
How do you correctly record private mileage for a lease car?
You can record private mileage correctly by keeping a complete and comprehensive log of your journeys. In this log, you should note, for each journey, the date, the starting address, the destination, the odometer reading at the start and end of the journey, and the purpose of the journey (business or private). The tax authorities have specific requirements for these records if you wish to prove that you drive fewer than 500 kilometres a year for private purposes.
What should be included in a mileage log?
An approved journey log must contain at least the following details:
- The date of the ride
- The starting point and the destination
- The mileage at the start and end of the journey
- The nature of the journey: business or private
- For business journeys: the customer’s name or the purpose of the visit
You can keep these records in a notebook, a spreadsheet or via an app. There are various apps available that automate journey logging via GPS. The tax authorities accept digital records, provided they are complete and verifiable.
What if you don’t keep a log of your journeys?
Without a logbook, the tax authorities will automatically assume that you also use the car for private purposes. In that case, the additional tax liability will be imposed, regardless of whether you have actually used the car privately. Keeping a logbook is therefore only compulsory if you wish to avoid the additional tax liability. If you also use the car privately and accept the additional tax liability, you do not need to keep a mileage log.
When is it a good idea to register an electric company car in the company’s name?
An electric company car registered in the business’s name is a sensible choice if you use the car mainly for business purposes, if you can benefit from the low additional tax liability for private use, or if, as a business owner, you wish to claim back VAT and expenses. The combination of tax benefits and lower running costs makes it an attractive option for many business owners.
It is advisable to register an electric company car in the company’s name if one or more of the following conditions are met:
- You drive more than 15,000 to 20,000 kilometres a year for business purposes
- You wish to deduct the VAT on the purchase or lease instalments
- You want to take advantage of the lower additional tax liability for electric vehicles
- Your business needs a professional and sustainable fleet of vehicles
- You wish to claim the maintenance and insurance costs as business expenses
On the other hand, it may be less advantageous if you use the car almost exclusively for private purposes. In that case, you’ll pay additional tax without deriving much business benefit from the vehicle. Buying or leasing a private car is often more cost-effective in such circumstances. Always seek advice from a tax specialist or accountant who is familiar with your specific situation, as the best option varies from one business owner to another.
How we can help you with electric commercial vehicle leasing
At Van den Hurk Commercial Vehicles, we understand that choosing an electric commercial vehicle through a lease involves more than just selecting a vehicle. Tax regulations, contract terms and conditions, and ensuring the vehicle is used correctly all call for a well-considered decision. We’ll help you every step of the way, from the initial consultation right through to final handover.
Here's what we can do for you:
- Wide range: We have a large stock of electric commercial vehicles, including models suitable as small vans or as commercial minibuses with double cabin.
- Personalised advice: We’ll work with you to determine which type of lease best suits your usage and tax situation.
- Flexible leasing options: Whether you’re looking for an operating or finance lease, we’ll find a solution that meets your needs.
- More than 60 years of experience: Our knowledge of the business market in North Brabant will help you make the right choice quickly.
- Stock alert: Can’t find your ideal electric commercial vehicle yet? We’ll let you know as soon as the right vehicle comes in.
Would you like to find out which electric commercial vehicle is best suited to your business and what the leasing options are, with or without private use? Please get in touch with us or take a look at our current offer on the website. We’d be happy to help you find a solution.
