Free car: New rules for calculating tax
The tax base for free cars has been adjusted in 2021. The environmental supplement weighs more heavily - the purchase price less. Find out how the gradual adjustment of the tax base affects your car economy here.
The amendment has a green approach. One of the aims is to make it more attractive to choose cars that have as little impact on the environment as possible.
There have been no changes in the way cars are taxed. It's the calculation basis itself that has changed, so over the coming years the impact of the environmental surcharge, among other things, will gradually increase.
The law came into force with effect from July 1, 2021.
Free car: Calculation rules until 30 June 2021
Employees who are provided with a company car for private use must be taxed on the value of the free car. The rules apply to both ordinary passenger cars and vans on parrot plates, etc.
The taxable value of a car provided by the employer for the employee's private use is assessed at an annual value of 25% of the part of the car's value that does not exceed DKK 300,000 and 20% of the rest. However, the taxable value of the car is always calculated on a minimum of DKK 160,000.
The value includes an environmental surcharge corresponding to the annual tax minus the equalization tax and private use tax according to the Fuel Consumption Tax Act or the Weight Tax Act, plus 50%.
New vehicle price or purchase price
For cars acquired or leased by the employer within 36 months of the car's first registration, the value is calculated at the original new car price. Thereafter at 75% of the new car price during the ownership or leasing period.
For cars acquired or leased by the employer for the first time after 36 months from the car's first registration, the value is calculated at the actual acquisition price or actual market value at the start of the leasing period plus costs for any repairs. This value is used throughout the ownership or lease period.
The rules for free car at your disposal can also be used by self-employed persons who are covered by the rules of the Business Tax Act.
Example: Calculation of tax on free car until June 30, 2021
Brand new company car with a value of DKK 400,000 and an annual environmental allowance of DKK 3,020.
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Free car: Calculation rules from 1 July 2021
The taxation rules themselves remain unchanged after July 1, 2021.
However, the calculation basis for taxation has been adjusted so that the environmental surcharge - in line with the green intention of the bill - weighs more heavily, while the purchase price weighs less.
The calculation basis for taxation of free cars from July 1, 2021 until 2025:
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Example: 2022 calculation of tax on free car from July 1, 2021
Brand new company car with a value of DKK 400,000 and an annual environmental allowance of DKK 3,020.
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Normal operating costs included in the value of the free car
Ordinary operating costs associated with the company car are included in the value of the free car. This includes gasoline, diesel, electricity, insurance, ownership tax, road tax, private use tax, maintenance, washing and parking at the workplace, etc. Bridge, ferry and road tolls related to the work are also included.
Bridge and ferry tickets, highway tolls and parking etc. associated with private use of the company car are not included in the value of the free car. The same applies to parking and speeding fines. If the employer pays for these expenses in full or in part, the employee must be taxed on the employer's actual costs.
Pros and cons of the new calculation rules
For those employees who choose a slightly cheaper and environmentally friendly company car, the adjusted calculation rules result in a financial benefit.
For those employees who prefer a more expensive and polluting company car, the adjusted rules put them at a financial disadvantage.
More information
If you need advice and guidance on company car tax, you are welcome to contact inforevision's tax department. You can read more about us here.
