If you provide your employees with a company car, they must pay tax on the value of their private use of the car.

A company car is subject to tax in the same manner as a salary and you must report the taxable value of the car via E-income.

  • The taxable value of a company car depends on the price and age of the car.
  • How much your employee uses the car does not affect the tax. Having the car at one’s disposal is what the tax is based on.
  • Your employee only pays tax on the number of months the car is at his or her disposal.

Report company car

Irrespective of the value of the car at your employee’s disposal, the tax will be calculated on the basis of a minimum value of DKK 160,000. This means that on an annual basis, the tax will be at least DKK 40,000 plus environmental supplement.

New cars and cars up to three years old

For new cars and cars which at the time of purchase are up to three years old, the value is the new-car price. This only applies from the date the car was initially registered and the following 36 months. After 36 months the value is reduced to 75%, but no lower than DKK 160,000.

This means that if your company car was first registered in December 2010, tax should be calculated on the basis of 75% of the new-car price with effect from December 2013.

Cars older than three years

For second-hand cars bought more than three years after the initial registration, you use the purchase price as the basis of the calculation; however, a minimum of DKK 160,000.

If the value of the car does not exceed DKK 300,000, your employee must pay tax on 25% of the value plus an environmental supplement. If the value of the car exceeds DKK 300,000, your employee must pay tax on 25% of the first DKK 300,000 and 20% on the remaining value plus an environmental supplement.

Calculating the environmental supplement

The environmental supplement is the same amount as the annual owner’s tax plus 50%. If the car is not covered by the rules on owner’s tax, the environmental supplement is calculated using the vehicle weight tax plus 50%.

Exception:

The equalisation tax on diesel cars and any tax on the private use of the car should not be included in the calculation. These taxes are stated on the invoice so you can easily subtract them.

Example: The car is four years old when it is put at the employee’s disposal. The market value is DKK 100,000, but the car value is calculated at DKK 160,000 as a minimum.
Value/taxAmount (DKK)
Car value DKK 160,000 (minimum value)
Environmental supplement (DKK 5,000 + 50%) DKK 7,500
25% tax on the value 0.25 x 160,000 = DKK 40,000
Plus the environmental supplement of DKK 7,500 DKK 40,000 + DKK 7,500 = DKK 47,500.
This means that the employee must pay tax on DKK 47,500. The specific amount which your employee must pay in tax depends on his or her tax rate. The amount of DKK 47,500 will be included in the box for earned income in your employee’s tax assessment notice.

Your employee will only have to pay tax on a pro rata amount corresponding to the number of months the car is at his or her disposal. The time is rounded up to whole months.

If your employee pays you for the private use of the car, the amount your employee pays you of his or her net salary/wages must be deducted from the taxable value of having the company car.

If, for example, your employee pays for the petrol, this does not entitle your employee to a deduction or a relief on his or her tax.

If you have bought a day permit for a car with a yellow commercial license plate and put the car at your employee’s disposal without your employee having to pay for the permit, you must report the price of the day permit as a company car benefit.