Electric company car: is the electricity a separate benefit?

When an employee is provided with a company car, they also often get a fuel card. The employee uses the card to buy fuel, then the employer gets a bill from the company issuing the fuel card. But how does this work with electric cars?

For tax purposes, company cars are evaluated on a lump sum basis, taking into account the price of the car, the type of fuel and the car's CO2 emissions. In 2014, the Finance Minister confirmed that this lump sum basis covers both the car and fuel costs, and that this principle also applies to electric cars. So there's no separate benefit if an employee with an electric company car charges the car while at work at the employer's expense.

If employees charge the car at their own home, the employer can in principle reimburse the cost of the electricity without any taxes or social security contributions being due. This is because it's part of the benefit in kind on which the employee is taxed on a lump sum basis. But the employer has to be able to establish the amount of the actual cost of the electricity used for charging the company car. This creates evidence problems. The employer has to establish both how much electricity was used and the cost of the electricity.

There are devices on the market measuring how much electricity is used when charging the car. But it's more difficult to establish the cost of the electricity, as each employee can have a different electricity supplier with a different rate. The price of electricity can fluctuate, for instance the impact of the weather on solar panels or wind turbines. So it would be extremely complex if an employer had to register the actual price of the electricity used for charging the electric company car paid by each employee.

When paying an expense allowance, the employer bears the burden of proof in making sure the expense allowance doesn't exceed the actual costs. In case of an inspection, there's a risk that the tax administration or the National Office for Social Security might decide the amount paid as reimbursement for electricity costs isn't sufficiently linked to the company car. The reimbursement would then be considered remuneration, and it would be subject to tax withholdings and social security contributions.

On 26 September 2024, the Finance Minister asked for a pragmatic approach in answering a question from a Parliamentary member. The Finance Minister started his reasoning by pointing out an employer paying an expense allowance bears the burden of proof in relation to the actual costs. He announced that the tax administration will issue new guidelines on how the costs for charging an electric company car at the employee's home can be calculated. The basic idea of the new guidelines is that there should be a device measuring how much electricity is used. And the tax administration will accept the cost of the electricity calculated using the rate set by the Commission for Electricity and Gas Regulations. This would mean the employer doesn't have to collect data on the actual price each employee pays for their electricity. And they can apply this amount to all employees with an electric company car.

The Finance Minister didn't add when these new guidelines will be issued and when they will enter into force.