Employers-levy for fossil fuel company cars from 2027

The new employers-levy of 12 per cent of the value affects organisations with a fleet running on fossil fuels, where employees are also allowed to use the cars for private and/or commuting trips. You will be faced with:

• Additional employer costs due to the employers-levy;

• More complexity in payroll tax remittance (identifying which cars and which periods fall under the employers-levy).

It is advisable to review your company car policy now, so that you are prepared for the new legislation.

From 2027, a new employers' levy will come into effect if you offer employees a fossil-fuel company car for private use. This initiative is designed to discourage the provision of fossil-fuel lease cars for personal use, speeding up the shift towards a more sustainable vehicle fleet. The key elements are:

• The employers-levy is a final levy, payable by the employer;
• It applies if the car may also be used for private purposes, whereby commuting is also considered private use;
• The levy is in addition to the employee’s regular taxable benefit (“bijtelling”) for the company car;
• The measure targets cars with CO2 emissions; fully electric cars are excluded;
• The employers-levy per year amounts to:
  • 12 per cent of the list price for cars up to and including 25 years old;
  • 12 per cent of the market value for cars older than 25 years.

Unlike the regular taxable benefit for company cars, the employee can’t avoid the employers-levy by limiting private use to a maximum of 500 kilometres per calendar year. For the employers-levy, commuting is also regarded as private use, whereas for the regular company-car benefit, commuting does not count as private use.

In the 2027 Other Tax Measures Bill, the Dutch government further develops the employers’ levy. Following discussions with the sector, several adjustments and clarifications are proposed.

Replacement car during maintenance or repairs

A fossil-fuel replacement car is exempt from the employers’ levy for up to 14 calendar days if the regular car is temporarily unavailable due to maintenance, repairs, damage repair, or a tyre change. If the replacement period is longer than 14 days, the exemption no longer applies from the fifteenth day. In that case, the employers’ levy may be due for the replacement car for the full calendar month in which the fifteenth day falls.

Temporary provision for up to seven days

To 31 December 2030, a temporary exemption from the employers’ levy applies if you make a fossil-fuel passenger car available for private use for a single uninterrupted period of no more than seven days in a calendar year. During this period, you may make the car available to one or more employees.

The exemption doesn’t apply if you make the same car available in more than one period during that calendar year, or for more than seven consecutive days. This may be relevant, for example, where you make a rental or shared car available on a one-off, short-term basis.

International situations

If a tax treaty allocates part of the right to tax an employee’s employment income to another state, you may use the same allocation for the employers’ levy on fossil-fuel passenger cars. The key factor is not how the car is actually used, but how the treaty allocates taxing rights over the employment income. In practice, this allocation will usually follow the ratio between working days in the Netherlands and working days abroad.

Manual-transmission driving instruction cars

The employers’ levy doesn’t apply to passenger cars with a manual transmission that you use to provide driving instruction.

You must settle the employers’ levy for 2027 when you file the payroll tax return for the second period of 2028. You can pay during the year based on an estimate and then reconcile later.

If a fossil-fuel company car isn’t available for the whole year, you only pay the levy for the months it’s available. If the car is available for private use for any part of a month, it’s treated as available for the full month for levy purposes.

You can’t pass the employers’ levy on to employees.

For fossil-fuel passenger cars that you first made available to one or more employees before 1 January 2027, the transitional rules are extended to 31 December 2030. The employers’ levy may then apply to these cars from 1 January 2031. According to the explanatory memorandum, a temporary break in making the car available doesn’t end the transitional treatment.

In the case of a merger or acquisition, the transitional treatment continues because the new employer follows the former employer. If an employee changes employer and the new employer has a different payroll tax number, the transitional treatment ends, even if both employers are in the same group. The transitional treatment continues if you make a qualifying car available to another employee under the same payroll tax number during the transitional period.

Within a group, the transitional regime for the pseudo-final levy lapses if you transfer fossil-fuel vehicles between group companies that each have their own payroll tax registration number. The Dutch State Secretary for Finance therefore advises you to set up one central employment company before 2027 that makes all fossil-fuel vehicles available to your employees, so you can make full use of the transitional regime.

The employers’ levy is part of a wider package to make vehicle fleets more sustainable. In previous years, the use of zero-emission cars was encouraged through lower benefit-in-kind percentages for employees. From 2027, the tax focus shifts so that fossil-fuel cars will be taxed more heavily instead.

The reduced benefit-in-kind percentages for employees have already been phased out step by step. In 2026, a reduced rate of 18 per cent still applies to the first €30,000 of the list price. In 2027, this percentage rises to 20 per cent. From 2028, the reduced rate will be abolished completely.

The employers’ levy is part of a wider package to make vehicle fleets more sustainable. In previous years, the use of zero-emission cars was encouraged through lower benefit-in-kind percentages for employees. From 2027, the tax focus shifts so that fossil-fuel cars will be taxed more heavily instead.

The reduced benefit-in-kind percentages for employees have already been phased out step by step. In 2026, a reduced rate of 18 per cent still applies to the first €30,000 of the list price. In 2027, this percentage rises to 20 per cent. From 2028, the reduced rate will be abolished completely.