Luxembourg Tax Alert 2023-12

VAT and company cars: Belgian circular published!

VAT and company cars: Belgian circular published!

In a nutshell, the circular provides that foreign employer’s putting company cars at the disposal of Belgian resident employees should be considered as providing car rental services to their employees and therefore apply Belgian VAT.

The Belgian VAT authorities consider that the taxable basis corresponds to the consideration or the normal value, when the consideration is lower than the normal value. The latter is calculated by reference to the (leasing) rents and costs related to the car. This costs basis should be multiplied by the “recovery percentage” and “professional percentage” to obtain the actual taxable basis which shall be subject to Belgian VAT.

Using the “recovery percentage”, which corresponds to the general recovery ratio of the employer, the circular acknowledges and factors in the situation of a mixed taxable person (employer) which does not have full recovery (banks, insurance, management companies) and considers that its input VAT deduction right should be considered to calculate the taxable basis of the deemed service it provides to its employees. In addition, the potential professional use of the vehicle should also impact the taxable basis, but the circular allows for the use of a lump-sum reference ratio of 65% (65% private use / 35% professional use).

A Luxembourg employer with a full VAT deduction right will thus have to pay the Belgian VAT on 65% of the car leasing and associated costs. A bank with 10% recovery ratio will only pay Belgian VAT on 6.5% of the costs.

The Circular foresees for an administrative tolerance as of 1st July 2021, as well as some slightly adapted computation rules for the regularization of past periods.

As regards Luxembourg and other neighboring countries, even if the exact scope of the QM decision and modalities for the application of VAT may remain unclear and, in some respect, subject to interpretation, we tried to summarize in the following section our understanding of the current situation.

Application of VAT to company cars in Luxembourg, France, and Germany

As a reminder, on 20th January 2021, the Court of Justice of the European Union (“CJEU”) released a decision regarding the application of VAT on company cars put by employers at the disposal of their employees. The case concerned a situation where employees reside in a Member State different from the one of the employers (in QM’s case, respectively Luxembourg and Germany).

In a nutshell, the CJEU ruled that the supply should be considered as made against consideration as “supply of long-term hiring of a means of transport” when:

  • the employee has the right to use the car for private purposes, for an agreed period of more than 30 days;
  • the employee has the right to use the car against the payment of a rent;
  • the car remains permanently at his disposal including for private purposes.

As a result, such supply should be subject to VAT at the place of residence of the employee. The employer should therefore be able to collect and remit the VAT in all the countries where its employees reside.

It is, in our opinion, also interesting to note that even if the CJEU did not directly nor explicitly refer to the guidelines issued by the VAT Committee of the European Commission as a result of their 101st meeting, both the Belgian and the Luxembourg VAT authorities use these guidelines to define the scope of application of VAT to the supply of company cars.

Based on these guidelines, it has been agreed “by a large majority” amongst the members of such VAT Committee that the use of goods forming part of the assets of a business by its staff for his private use shall be regarded as a service supplied for consideration (on which VAT should apply) where, to access such use, the member of staff must:

  • make a payment or
  • give up part of his cash remuneration or
  • choose between different benefits offered by the employer, according to an agreement between the parties whereby the right to use those goods implies renouncing to other benefits.

Interpreting the decision and VAT Committee guidelines, Belgium and to some extent Luxembourg have clarified their positions when it comes to company cars, whereas the German and certainly the French situations still lack clarity.

Here is what we know so far: 

  Luxembourg Germany Belgium France

Release of an official position?

Shortly after QM: publication of Circular 807 (11th February 2021)


Additional Circular 807bis (28 April 2023) provides additional guidelines

No position published by the German tax authorities, but they were parties to the QM case


With judgement on the 30th of June the German Supreme Tax Court (“BFH”) dismissed the appeal against the tax assessment and overturned the decision of the lower tax court in Saarbrücken

Circular 2023/C/72 of 1 September 2023


Application of QM? Yes Yes Yes In principle yes

Scope of application?

In the following situations, the supply is considered as made against consideration and subject to VAT in Luxembourg:
  • if the employee pays a rent to the employer, or
  • if the employee renounces to a part of its gross salary, or
  • if the employee chooses between different types of benefits and has to give up one to be able to benefit from one other.

In contrast to the CJEU the BFH considers that also the work performance constitutes a remuneration for the provision of a company car.


A taxable supply of service is given if:

  • a direct connection exists between the supply (provision of the car) and consideration, which can result from the provision of the company car within the framework of an employment contract, or
  • the employee makes an additional payment (including payment of difference between actual leasing instalment and granted leasing budget), or
  • the employee waives part of his salary for the use of the company vehicle, or

the use of the company car is linked to the waiver of another benefit otherwise granted.

In cross-border situations and in the following circumstances in particular:
  • if the employee pays a rent to the employer, or
  • if the employee renounces to a part of its gross salary, or
  • if the employee chooses between different types of benefits and has to give up one to be able to benefit from one other, or
  • in case of a debit from the current account of the manager, director, etc., up to the amount of the agreed contribution.

Scope to be clarified but VAT should in principle at least apply in case of cash payment by the employee


In principle applicable at the date of the QM decision but retroactive application is getting increasingly difficult in the absence of the necessary clarifications

The statute of limitation is generally 4 years however in case no returns were filed 7 years.

10 years (in case of suspicion of fraud or evasion)

Administrative tolerance until 1st July 2021

To be confirmed

Taxable basis

Rental costs, or in case of acquisition amortization costs (based on a 5 year schedule) as well as associated charges


Professional use to be excluded but modalities have not been clarified yet (lump sum?)

In principle the proportion of the private use. In absence of such documentation Germany accepts the payroll tax basis being:


  • 1% rule of the gross list price plus 0.03% of the said price per km of distance from home to office plus 0.002% for family home trips in case an employee runs two places of dwelling


  • The consideration, or
  • The normal value (in case the consideration is lower than the normal value): (leasing) rents and costs related to the car, multiplied by the “recovery percentage” and "private use percentage"

To be confirmed

Potential penalties

Expected to be reduced in case of spontaneous regularization

No penalties unless tax authorities assume tax evasion or tax fraud


Voluntary disclosure of the facts and the taxable basis in a specific letter to the authorities is recommendable to avoid prosecution

Expected to be no fines and late payment interests in case of spontaneous rectification

To be confirmed

Remaining open points

Date of application to be confirmed

Professional use percentage (lump sum methods accepted and related percentages?)

Extent of associated charges to be included in the taxable basis




In the absence of any communication: application to be confirmed as well as scope, retroactivity and taxable basis in particular

Your team of VAT experts stay at your disposal for any further question you may have.