The sale of a company car to the director-shareholder: VAT legal boundaries in Dutch case law

The sale of a car by a Dutch private limited company (hereinafter: BV) to its director-major shareholder (hereinafter: DGA) is a transaction frequently encountered in Dutch practice. While the transaction may appear to be a routine asset transfer within the corporate sphere, it often gives rise to complex VAT considerations. These considerations emerge particularly when the agreed sale price is significantly below the market value of the vehicle, raising the question of whether the full VAT due has been properly accounted for.

Over the past year, multiple Dutch courts have weighed in on this issue, addressing how the VAT system should respond to such intra-group transactions. Although the cases involve similar facts - namely, the transfer of a car from a BV to its DGA at a low price - the courts reached different conclusions. This divergence highlights the interpretive challenges surrounding the subjective versus objective taxable amount, the doctrine of abuse of law, and the role of disguised dividends within the VAT framework.

This article examines three important Dutch decisions handed down in 2024 and 2025. Each decision contributes to the ongoing development of Dutch VAT jurisprudence by testing the boundaries of permissible pricing structures between companies and their directors-shareholders.

Legal framework: Dutch provisions in the light of EU law

Dutch VAT rules are laid down in the Dutch VAT Act 1968 (Wet op de Omzetbelasting 1968, hereinafter: VAT Act), which implements the provisions of the EU VAT Directive 2006/112/EC. Under this regime, VAT is levied on the supply of goods for consideration (Articles 1 and 3 VAT Act; Articles 2 and 14 VAT Directive). According to Article 8 of the VAT Act, as well as Article 73 of the VAT Directive, the taxable amount is the actual consideration received. This reflects the so-called subjective taxable amount: the agreed and paid price is decisive, regardless of the market value.

Article 80 of the VAT Directive allows Member States to apply an objective taxable amount in specific situations, such as transactions between connected parties. However, the Netherlands has deliberately chosen not to implement this provision. Nevertheless, Dutch case law - particularly that of the Dutch Supreme Court and the Court of Justice of the European Union (CJEU) - shows that in exceptional cases, adjustments may still be made based on the doctrine of abuse of law. This doctrine plays a critical role in Dutch practice to combat cross-border tax avoidance or, in this context, artificial VAT advantages.

Core Issue: subjective vs objective taxable amount

The default rule in both Dutch and EU law is the subjective taxable amount - what is actually paid and received. In transactions between independent third parties, this rarely gives rise to dispute. However, when the transaction takes place between related parties - such as a BV and its DGA - and the agreed price deviates significantly from the market value, the question arises whether that price still reflects economic reality. When the price is artificially low, there is a risk of tax avoidance, triggering the need for legal scrutiny.

Three Dutch cases, three outcomes: an in-depth analysis

1. District Court of Northern Netherlands – 12 September 2024 (ECLI:NL:RBNNE:2024:3540)

This case concerned a one-off transaction involving the sale of a Tesla Model S by a BV to its DGA for EUR 2.205 excluding VAT, while the car’s fair market value was assessed at EUR 25.000. The Dutch Tax Administration took the position that the taxable amount should reflect the market value of the vehicle, arguing that the agreed price did not constitute a genuine consideration and that the transaction should either be qualified as a deemed supply or be adjusted under the doctrine of abuse of law.

The court, however, found in favor of the taxpayer. It held that there was a direct link between the supply of the car and the consideration received, as required under Dutch and European VAT law. The DGA had paid the full invoice amount, and credible, non-tax related motives were presented: the vehicle had reached its depreciation threshold and imposed a considerable fiscal burden through the private use addition. The court further dismissed the argument of disguised dividend distribution, noting the absence of any objective link between a dividend entitlement and the reduced price.

2. Amsterdam Court of Appeal – 19 December 2024 (ECLI:NL:GHAMS:2024:3591)

In this markedly different case, the facts revealed a recurrent pattern. A VAT group sold multiple luxury vehicles with a substantial market value (ranging from EUR 70.000 to EUR 90.000) to its DGA for a uniform and significantly reduced price of EUR 15.000 per car. These transactions took place over a series of years and followed an internally consistent, yet economically unsubstantiated pricing strategy.

What distinguished this case was the clear presence of fiscal planning: the DGA had explicitly waived dividend payments, which the court considered part of the reciprocal arrangement to facilitate acquisition of the vehicles at below-market value. The court characterized this structure as a deliberately constructed scheme designed to minimize VAT liability. Applying the doctrine of abuse of law, it requalified the transactions and based the VAT assessment on the objective market value of the vehicles. The dividend waiver was included in the taxable base, reflecting a comprehensive view of the consideration received.

3. ’s-Hertogenbosch Court of Appeal – 29 January 2025 (ECLI:NL:GHSHE:2025:215)

The ’s-Hertogenbosch Court dealt with a sale of a vehicle to a DGA for an amount significantly below market value, raising similar concerns. However, the court’s findings diverged from Amsterdam’s. It was established that the transaction had an incidental character, and no structural patterns or tax avoidance mechanisms were discernible. Unlike in the Amsterdam case, there was no evidence of a dividend waiver or internal policy of undervaluation. The DGA paid the invoiced amount in full, and the company cited legitimate internal reasons for the sale, including efficiency and obsolescence of the vehicle.

The court emphasized that the mere existence of a low sale price is insufficient to trigger a requalification under VAT law. The transaction, lacking artificiality or fiscal manipulation, was upheld as a supply for consideration under the subjective taxable amount. The court declined to infer abuse of law or any disguised dividend element.

Abuse of Law in Dutch Legal Practice

The doctrine of abuse of law plays a pivotal role in Dutch VAT law to neutralize undue tax advantages. According to the CJEU (e.g., Halifax, Weald Leasing) and the Dutch Supreme Court (HR 10 September 2021, ECLI:NL:HR:2021:1230), abuse of law exists if:

1.      the formal application of legal provisions results in a tax benefit that is contrary to the purpose and spirit of those provisions; and

2.      the essential aim of the transactions is to obtain that benefit.

Dutch courts assess this based on objective circumstances and examine the economic reality behind the transaction. Repetition, artificiality, and the absence of legitimate business motives are key indicators. The Amsterdam court saw repeated transactions at fixed, non-market prices as evidence of abuse. The other courts found insufficient grounds to draw this conclusion.

Disguised dividends and the taxable amount

A recurring issue in these cases is the VAT treatment of disguised dividend distributions. The legal question is whether such a benefit to the DGA - manifested through a reduced purchase price - can be classified as (part of) the consideration for VAT purposes. As clarified in CJEU case law (Floridienne/Berginvest, C-142/99), there must be a direct and economic link between the supply and the consideration.

In the Amsterdam case, this connection was explicitly made through the DGA’s relinquishment of dividend rights in exchange for preferential pricing. The court interpreted this as forming part of the overall consideration. In contrast, both the Northern Netherlands and ’s-Hertogenbosch courts rejected this approach, emphasizing the absence of such a direct compensatory structure and reiterating that subjective consideration remains decisive unless a clear link to another benefit can be established.

Practical implications for Dutch practice

These rulings illustrate the tension between civil-law freedom to determine prices and the fiscal objective of ensuring correct VAT levies. For Dutch taxpayers and advisors, the following practices are recommended:

·         Thoroughly document each transaction with a DGA, including supporting valuations and commercial rationale;

·         Obtain an independent appraisal when pricing deviates from the market standard;

·         Be cautious with recurring intra-group sales, particularly when following a fixed low-price policy;

·         Avoid indirect dividend structures that could be construed as part of the consideration without clear legal delineation;

·         Disclose all relevant information transparently in correspondence with the Dutch Tax Administration.

Adhering to these practices can help prevent disputes, reduce litigation risk, and ensure compliance with both domestic and European VAT standards.

Conclusion

The sale of company cars to DGAs presents a nuanced challenge within Dutch VAT law. While the subjective taxable amount remains the standard, courts are increasingly attentive to the broader economic context and potential for abuse. These recent judgments illustrate that isolated transactions grounded in commercial reasoning will generally be respected, whereas systematic undervaluation and tax-driven structuring may prompt judicial intervention. Practitioners should remain vigilant, ensuring both procedural and substantive transparency in all shareholder-related asset transfers.