VAT Newsflash

VAT treatment of company cars in cross border cases

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Frank Heykes
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In the case C-288/19, the Court of Justice of the European Union recently decided on the VAT treatment of company cars, which are put at the disposal of the company’s employees for private use.

If such disposal is made (a) in return for rent (payment of money or withholding of salary), (b) for an agreed period and (c) including the right to use it and to exclude other persons from doing so, it might be considered as a hiring of means of transport.

Such hiring would be VAT taxable in the country where the employee is residing and it might oblige the Luxembourg company to register for VAT in these countries. However, it should be mentioned that declaring a benefit in kind on the pay-slips is as such not sufficient to be considered as a rent.

Luxembourg companies providing company cars to their employees for private use, should review their company car policy and the circumstances (agreements in place and conditions of the disposal, etc.) in order to determine the potential consequences.

For Germany, it seems clear that the new interpretation will apply, but for Belgium and France, we currently have no indication whether or not they will follow the German example.

How we can help

Our VAT department is happy to assist you on any query in relation to the above matter. Do not hesitate to contact Frank Heykes.