On 4 September 2023, the Belgian VAT authorities issued Circular 2023/C/72 providing some useful guidance on Belgian VAT treatment of company cars provided by Luxembourg employers to employees residing in Belgium (“Belgian Circular”).
The Belgian Circular follow the principles set out in the QM case (C-288/19) back in January 2021. Accordingly, the provision of a company car by a foreign employer to a Belgian resident employee for consideration qualifies as a “supply of long-term hiring of means of transport” (and therefore subject to VAT in Belgium) where (i) the employee has been conferred a permanent right to use the vehicle for private purposes and to exclude other persons from using it, (ii) in exchange for rent and (iii) for an agreed period of more than 30 days.
According to the Belgian Circular, there is a supply against “consideration” in the following cases:
- Payment by the staff member to the company,
- Withholding of a portion of the remuneration by the company,
- Debiting from the current account of the company’s manager, director, etc., up to the amount of the agreed remuneration, or
- A choice by the staff member between various benefits, offered by the company, where the right to use the company car implies the waiver of other benefits.
The Belgian Circular also provides formulas to compute the taxable basis on which the Belgian VAT would be applicable. The formulas cover the following two cases:
- The company car is leased by the employer:
(rent excl. VAT + expenses excl. VAT) X (% deduction - % professional)
- The company car is purchased by the employer:
(purchase price excl. VAT/5 + expenses excl. VAT) X (% deduction - % professional)
Where:
- The % Deduction takes into account the amount of VAT effectively deducted by the employer in relation to leasing costs.
- The % Professional is the portion of professional use of the car by the employee. The Circular allows (under conditions) the use of a fixed ratio of 35% (for professional use)/65% (for private use).
However, employers entitled to a partial VAT deduction must also take into account the percentage of their VAT recovery right in their computation as follows:
- The company car is leased by the employer:
(rent excl. VAT + expenses excl. VAT) X (% deduction - % professional) x deduction prorata
- The company car is purchased by the employer:
(purchase price excl. VAT/5 + expenses excl. VAT) X (% deduction - % professional) x deduction prorata
Although the QM Case should be applied retroactively as from 1 January 2013 (being of an interpretative nature), the Belgian Circular allows, in most cases, regularisations to be done as of 1 July 2021 under the “One-Stop-Shop” (OSS) system (amongst other possibilities).
