7.4.3 Case 3

The car dealer can deduct the VAT on the purchase of the navigation system. The supply of the navigation system is not treated as an independent supply for VAT purposes; it is ancillary to the principal supply (the supply of the car).

The supply for free of the bicycle creates a deemed supply. The car dealer can deduct the VAT on the purchase of the bicycle but the supply of the bicycle will qualify as a deemed supply for which the car dealer will have to account for 19% VAT on the purchase price of the bicycle.

This is a free accessory in the line of supply. The treatment may vary depending on whether the free accessory was dealer-funded or manufacturerfunded. Assuming that it was funded by the dealer, this looks like a simple added component to the provision of the car for a single price. It would be likely to be treated in the same way as in the Netherlands.

This is the purchase of goods to be used as business gifts and treated as it would be treated in the Netherlands.

The employee is not the (legal) beneficiary of the navigation system, but the lessee, even if the employee uses it. Then also the use of the navigation system is granted only temporarily. Under these circumstances, supplying the car with a navigation system might be considered a main supply (car) with an ancillary supply (navigation system). There are no direct opinions (tax administration, judgments, literature) in this respect. For income tax purposes, there is a judgment of the Supreme Tax Court that the cost of a navigation system in a car the use of which is granted to an employee is included in the flat tax base. Although not mandatory, it is likely that the employer uses the flat tax scheme also for VAT purposes. In this case, the value of the navigation system is included in the value for VAT purposes as well.

When the dealer offers a free bicycle to the employee, who can keep it after the expiration of the lease term, there is a supply of goods without consideration to be treated as it would be treated in the Netherlands.

The built-in navigation system is not a supply which is independent from the car and the car dealer can deduct the input VAT on the purchase of this item.

The free bicycle is considered as a gift and the VAT incurred at the occasion of this purchase is deductible under the same conditions as business gifts (unlikely since the value of the gift cannot exceed € 60, VAT included to give right to deduction).