Following the CJEU’s decision in QM (case C-288/19), the Belgian VAT authorities have issued Circular 2023/C/72 dated 1 September 2023.
The Circular sheds light on the practical application of the QM case regarding the Belgian VAT treatment of company cars. In short, it states that, under certain conditions, the provision of a company car to a Belgian resident employee by a foreign employer for consideration qualifies as a long-term hiring of a vehicle which is taxable in the Member State of residence of the employee, i.e. in Belgium.
In this situation, the taxable amount is either the consideration or the normal value, where the consideration is lower than the normal value. The Circular sets out the computation method for ascertaining the normal value, which depends on the employer’s VAT recovery right:
- Vehicle leased by employer: (Rent excl. VAT + Expenses excl. VAT) X (% of VAT deduction - % Professional) X employer’s VAT deduction percentage.
- Vehicle purchased by employer: ((Purchase price excl. VAT/5) + Expenses excl. VAT) X (% of VAT deduction - % Professional) X employer’s VAT deduction percentage.“
% of VAT deduction” corresponds to the amount of VAT that has been effectively deducted by the employer.
“% Professional” corresponds to the effective split of the use of the vehicle between private and professional use. In this respect, the Circular permits the use of a fixed ratio of 65% for private use and 35% for professional use.
In light of this taxable activity in Belgium, Luxembourg employers providing company cars to Belgian resident employees are required to register for VAT in Belgium to assess domestic VAT on the provision of cars. However, they can make use of the VAT one-stop-shop (“OSS”) platform to declare and pay the VAT due in Belgium and thus avoid a domestic VAT registration.
Those same Luxembourg employers must also retroactively regularise their situation with the Belgian VAT authorities if they have provided company cars to their Belgian resident employees in the past.
Despite noting that this new interpretation should be applicable as from 1 January 2013, the Circular sets 1 July 2021 as its implementation date, thus allowing taxpayers to use the OSS to regularise their past position as well.
To simplify the regularisation of closed financial years, the consideration for the provision of cars can be treated as including Belgian VAT. In this specific case, the VAT amount to be paid can be determined as follows:
(((Rent excl. VAT + Expenses excl. VAT) X 65%)/1.21) X 21%.
If your company provides company cars to employees residing in Belgium, it is important to assess your current reporting obligations, as the details of your internal car policies may have an impact on the applicable VAT treatment.
Where employers intend to pass on the VAT burden to their employees in full (the default scenario), the clarifications in the Circular significantly streamline the resulting charge for Belgian residents. Not only does the Circular provide a comprehensive method to calculate the taxable amount, it also unequivocally underscores the need for retroactive regularisation. By contrast, uncertainty remains for French and German residents.
Likewise, where the employer opts to absorb a portion or the entirety of the VAT liability on behalf of the employee, the recognition of a benefit in kind remains the default stance, without further guidance from the Luxembourg tax authorities.
Finally, where the employee bears the VAT burden, no clear guidance has been provided either regarding a potential reduction in the in-kind benefit accounted for in relation to the car, although the matter is being discussed with tax offices.
