WLTP to affect CO2
value and vehicle taxation?
Interview with Erik Wijbenga, country manager
of Dragintra Fleet Services Netherlands
Read time: 7 minutes
WLTP to affect CO2 value and vehicle taxation?
Erik, what is WLTP and how are employers and employees affected?
“WLTP is short for Worldwide harmonized Light vehicles Test Procedure which is the new test method for CO2 emissions. A fairer method, as WLTP is based on real driving data. WLTP replaces NEDC (New European Driving Cycle), the old lab test performed under favourable conditions. Unsurprisingly, WLTP will result in higher CO2 values than NEDC.
This means that the same car will be allocated a higher CO2 value under WLTP. In reality, the car does not emit more, but the emission value increases as a result of the test method. This could prove a serious problem for companies’ corporate social responsibility (CSR) policy. A car complying with the company’s policy standard is likely to exceed the policy standard when tested under WLTP.
WLTP could also result in a substantial increase in costs, not just for the employer, but for the employee as well. In many countries, vehicle taxation – e.g. upon first registration – is CO2-based. Examples are BPM (private motor vehicle and motorcycle tax) in the Netherlands and BIV (also a vehicle registration tax) in Flanders, Belgium.
In many countries company cars are an employee benefit and employees are taxed based on the purchase price of the car. As the registration tax increases, so does the purchase price, which could result in a higher addition to the employee’s taxable income.
The Dutch government has promised that any increase in BPM as a result of the transfer from NEDC to WLTP should not come at the expense of the consumer. Unfortunately, it is not clear how compensation – if any – will be affected. Will the government lower BPM? We won’t find out till Prinsjesdag (the Dutch State opening of Parliament) on 18 September next. WLTP may officially come into force on 1 January 2019, but the transition period already commenced in September 2017 and becomes compulsory in the Netherlands as from 1 September 2018. In other words: before Prinsjesdag…
What happens during the compulsory transition period?
“Instead of real driving data, a conversion method based on WLTP is used during the transition period in the Netherlands. We call this NEDC 2.0. Under NEDC a car was tested based on its most favourable configuration, that is without towing hook or wide rims, etc. During NEDC 2.0 the most unfavourable configuration is used as a basis, resulting in a much higher CO2 values. It does not matter whether in reality you opt for a fuel-saving configuration: the higher CO2 value applies to cars registered from 1 September 2018.
The critical question is: what is the government promise about? Does it concern the transition from NEDC 2.0 to WLTP or the transition from the old NEDC to WLTP? And what happens to cars that are registered from 1 September onward and are valued on the basis of NEDC 2.0?
Sample calculation: BPM increase of 7,000 euros
Sample calculations show a significant increase in the Dutch registration tax BPM. We have sample calculations showing increases in BPM from 3,000 to no less than 10,000 euros. This means that the price increase takes place during the transition from NEDC to NEDC 2.0. Not from NEDC to WLTP. The question is how Dutch buyers will be compensated for this particular increase.
There’s a serious risk for car buyers. At present, you can buy a car at an agreed price. But if that car is registered after 1 September next, the buyer will be charged the additional registration tax. After all, purchase and lease contracts stipulate that any price increase due to legislation is charged to the buyer or customer of the leasing company. Only a few car brands already publish the prices based on NEDC 2.0.
Vehicle tax consequences are not limited to the Netherlands. According to the Verband der Automobilindustrie, German vehicle taxes for newly registered vehicles will also increase as from 1 September 2018.
Clarity after Prinsjesdag?
I would like to stress that we will only know for sure after Prinsjesdag. That’s when we will learn what the Dutch government plans to do with the registration tax.”
You mentioned that nothing is fixed. Do you think employers are sufficiently aware of the consequences?
“In general, I don’t think so. Which is not surprising, as so much still remains uncertain. Still, it is very important that employers should consider their CSR policy. This is why we held a workshop on this subject for our Dutch customers last April.
As an employer you need to determine what your priorities are. If you wish to continue to comply with today’s CO2 emission limits, you would have to switch to smaller cars. In the more expensive range, you could opt for a lighter engine and fewer accessories in the more expensive range. You could abandon wide rims or sunroofs. But you don’t have such options if you are already complying with low CO2 limits.”
What would you advise?
“To begin with, employers should rethink their car and CSR policy. From the employee benefits perspective, this won’t be easy. A Dutch study into company cars shows that employers still rate a company car as one of the most important employee benefits. The introduction of mobility budgets is an option preferred by employers, but this preference is not shared by many employees.
As an employer in the Netherlands I would mark time as far as new cars are concerned. If you could extend the term of lease contract, by all means do. And most of all, do be careful with cars that may be registered after 1 September 2018: make sure you know the price on the basis of NEDC 2.0.”