In a new circular letter published on the 1st of September 2023, the Belgian VAT authorities clarify the applicable VAT rules for the provision of company cars to employees in a cross-border context.

Two requirements for the provision of a company car to be seen as a long-term hire of means of transport, which is subject to VAT in the employee’s country of residence

Based on article 56, paragraph 2 of Directive 2006/112/EC, the place of hiring of a means of transport to a non-taxable customer shall be the place where that customer is established, has his permanent address or usually resides. This provision does not apply to short-term hiring (= continuous possession or use of the means of transport throughout a period of not more than thirty days).

Taking into account the QM judgment of the Court of Justice of the European Union, the new circular letter states that the cross-border provision of a company car to an employee can only fall in the scope of article 56, paragraph 2 of Directive 2006/112/EC when the company car is provided “for consideration” (i.e. not free of charge). According to the Belgian VAT authorities, this criterion is met in the following scenarios:

a) there is a payment by the employee to its company for the car being made available to him, or;

b) there is a deduction from the salary of the employee, or;

c) there is an amount debited from the current account of the director, company manager, etc., or;

d) the employee chose the car among various benefits and his entitlement to use the car is contingent on the forgoing of other benefits.

The fact that the private use of the vehicle is considered as a quantifiable benefit in kind for income tax purposes is in principle not relevant here.

In case of doubt concerning the qualification “free of charge” / “for consideration”, there is a possibility to ask a formal confirmation from the VAT authorities. This has to be done via email to with subject matter “Request for a QM ruling”.

Besides the fact that there must be a remuneration received by the employer (directly or indirectly – see points a. to d. above) there is also an extra requirement. The company car should be provided for an agreed period of more than 30 days and the employee should have an uninterrupted right to use the car for private purposes and to exclude other persons from using it. As such, for example, cars exclusively used for professional purposes or pool cars for more than one employee are not falling within the scope of article 56, paragraph 2 of Directive 2006/112/EC. 

Place of supply for VAT purposes and applicable VAT rules when this place is situated in Belgium

If the aforementioned requirements are met, then the provision of the company car to the employee is subject to VAT in the employee’s country of residence. More specifically, in a cross-border context, this means that Belgian VAT will be due when the place of establishment of the employer is located outside Belgium and the address or residence of the employee is located in Belgium.

Consequently, the foreign employer should in principle register for VAT purposes in Belgium to declare and pay the Belgian VAT due or alternatively, he could also opt to declare and pay the VAT due through the One Stop Shop scheme (OSS). In that way the foreign employer can avoid an individual VAT registration in Belgium.

As regards the taxable base for VAT, the VAT authorities are largely referring to the calculation methods for determining the “normal value”, as listed in points 158 and 159 of circular letter AAFisc No. 36/2015 (No. E.T.119.650) of 23 November 2015.

Last but not least, the circular letter also offers an answer as regards the regularizations that have to be performed by foreign companies that did not pay Belgian VAT on the provision of company cars to their Belgian employees in the past. Normally, under the standard 3-year limitation period, the years 2020 and following are currently still open for VAT assessments. However, by way of tolerance, the VAT authorities state that only the transactions as from the 1st of July 2021 have to be taken into account when it comes down to performing VAT regularizations for the past (the choice for this date is no coincidence because it is situated after the QM judgment and it is also the date when the OSS scheme was extended to a wider range of supplies). Based on the circular letter, however, this tolerance would not apply to the provision of company cars as referred to in point a. above, “when the consideration fully consists of a payment by the employee to the employer (full amount deducted from net salary)”. 

Cross-border scenarios versus domestic Belgian scenarios

The circular letter of 1 September 2023 that is covered here, only relates to cross-border scenarios and it is explicitly mentioning that “no position is taken with respect to domestic Belgian scenarios”.

It is remarkable in this respect that an earlier circular letter from 2021 is mentioning that the provision of a charging station by a Belgian employer in return for a reduction of the gross salary of its Belgian employee, is considered as a provision “free of charge”. One may wonder whether there is a difference in treatment here between, on the one hand, Belgian employers and, on the other hand, foreign employers that provide company goods to their Belgian employees. Hopefully, this is something that will be clarified in future administrative guidelines. 

If you have any questions in relation to the above and/or in case you want to discuss the potential impact for your company, then please feel free to reach out to your contact at KPMG.


Author: Pieter De Wandel, Sr. Manager