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If you are going to lend a vehicle to an employee for his or her private use, make sure that the vehicle is energy efficient. Thus, for the same price, the IRPF costs and the income on account can be lower.

Remuneration in kind

20% of the value. If your company gives one of its employees the use of a car to use for private purposes, you will have to deduct a payment in kind from your personal income tax. The valuation of this remuneration in kind will be as follows:

If your company is the owner, 20% of the purchase price (including VAT and registration tax) must be deducted each year as remuneration in kind, in proportion to the private use made of the vehicle.
If you are not the owner, this percentage of 20% is applied to the market value that would correspond to the vehicle if it were new. If your company has leased or rented the vehicle, 20% of the purchase price (including additional costs) is taken into account.

Withholding taxes. In addition, if your company assumes the cost of the income on account of personal income tax derived from this remuneration in kind (the result of multiplying the employee’s withholding rate by this remuneration), you must also allocate this income on account as a higher salary in kind for the employee.

Better an efficient vehicle

From 14%. Well, you should know that you can reduce the amount of the employee’s payment in kind, as well as the payment on account (and thus reduce costs for both your company and your employee), if the vehicle provided is considered to be energy-efficient. In this case, the chargeable amount can be reduced by up to 30%, so that the transfer can be valued at only 14% (instead of 20%).

Type of vehicle. In particular, the valuation depends on the type of vehicle:

  • Euro 6 . For Euro 6 vehicles with CO2 emissions of up to 120 g/km and a market value of the new vehicle of up to ¤25,000, the valuation is 17% (a reduction of 15% is applied).
  • Hybrids . In case of hybrid vehicles or vehicles powered by combustion engines that can use alternative fossil fuels (autogas -GLP- and Natural Gas), with a value as new of up to 35,000 euros, the valuation is 16% (with a reduction of 20%).
  • Electric vehicles . In the case of electric vehicles, the valuation is 14% (maximum reduction of 30% is applied).

Example. Your company leases a vehicle worth 50,000 euros to an employee for private use only. If a withholding tax rate of 30% applies and the company bears the cost of the payment on account:

Item Normal vehicle BEV vehicle
Annual % chargable 20% 14%
Annual remunaration in kind 10.000 7.000
Payment on account 30% 3.000 2.100
Annual company savings 900

If the vehicle is also used for business purposes, the remuneration is imputed only in proportion to the private use.

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