On 10 March 2015, the Luxembourg tax authorities released a new circular letter (the “New Circular”), taking effect immediately and cancelling Circular L.I.R. 04/1 of 20 November 2014 (the “Old Circular”).
The Old Circular was initially introduced to amend Circular L.I.R. 104/1 of 18 February 2009, introducing the taxation of the recovery of a vehicle by the employee at the end of the leasing contract as an advantage in kind, since there was no taxation up to that point.
The New Circular and the Old Circular both have largely identical wording. The major difference between them are in the examples listed with respect to the advantage in kind resulting in the recovery of a vehicle by the employee at the end of the leasing contract concluded between the employer and the lessor and the determination of a tax ceiling.
The New Circular is more beneficial to the employee, since it includes the participation of the employee in the repurchase of the car after expiry of the leasing contract. The Old Circular did not include this point for the determination of the tax ceiling.
