My staff really need a rental car for work, but as an employer, I can not afford it at the moment. Therefore, I chose another solution: I pay them a more than usual fee for using their private car. Instead of 19 I pay 35 cents per kilometer. I am familiar with the fact that this fee is above the permitted tax-free amount. Hence my two-way question: Can I pay my employees who pay higher compensation tax-free, which is covered by the free space of the labor cost scheme and fits that within the usual test?
Within the law, a 19-cent fee is tax-free per business mileage. If you pay a higher fee, you will be charged as a salary in principle. The amount above 19 cents, in your case 16 cents per kilometer, can be designated as end-pay wage and it is possible to accommodate it in the free space. For your employees, the fee is tax-free and as an employer you can deduct this fee as (wage) costs on your operating result. There is one objection: it does not affect if you do not exceed the maximum free space of 1.2% of the tax payroll. However, if you go over 1.2%, you will be charged 80% for the excess and you can not tell stories about your employees.
When using the free space, take into account the so-called custom test. This means that you can only accommodate fees and benefits in that space as usual. This usually applies to the amount of compensation provided. But in addition, it is also examined whether the compensation in normal circumstances is normally allowed, with the employer paying the payroll tax. In addition, a margin can be used. The fees and benefits may vary up to 30% from what is common in similar circumstances. And then the question arises whether it’s in your industry’s usance to accommodate a mileage fee of 35 cents per business kilometer in the free space.
It is up to the tax office to show that a fee is not usual. When utilizing the free space, the tax authority is working on a free margin of 2,400 euros per employee per year. A general fee for this amount is usually found by the tax authorities and as an employer, you do not have to explain that amount. Within that 2,400 euro it is possible to pay a tax of 35 cents per employee per year per year over 15,000 kilometers. Specifically specified: 19 cents under the targeted exemption and 16 cents in the free space.