Luxury on Wheels: Employee Perks or Parking Lot Shenanigans? Unveiling Car Perks in Belgium

The VAT treatment on short-term vehicle rentals has been the focal point of many debates (and circulars). Fortunately, we're here to clarify things by looking at some of Belgium's most significant court rulings. 

Buckle in, folks. Here's what you need to know about VAT on the VAT treatment of company cars in Belgium. 

Overview

Recent VAT updates in Belgium have clarified the specific VAT treatment between Luxembourg employers and Belgian employees and the provision of company cars. This follows the CJEU's decision in QM (case C-288/19); the Belgian VAT authorities have issued Circular 2023/C/72 dated 1 September 2023.

So, what does this circular mean exactly, and how does it affect business operations? Let's dive in!

The Circular

The Circular —a document that clarifies rules—sheds light on how a specific court case (the QM case) affects Belgium's company car tax. Specifically the VAT treatment around cars given to Belgian employees by foreign employers. 

In a nutshell, The Circular explains that in certain circumstances, providing a company car to a resident Belgian employee may qualify as long-term vehicle hiring. According to this classification, it constitutes a taxable activity in the Member State of the employee. 

This raises the next obvious question: how is the taxable amount calculated and charged? Fair point. In this situation, the Belgian tax authorities can calculate the VAT based on either the consideration or the normal value (where the consideration is lower than the normal value). Regarding the calculation method, tax authorities will look at the employer's VAT recovery right and how the car is used (for work or personal reasons). This helps decide how much VAT should be paid in Belgium.

The VAT obligation

What does this mean for foreign employers with employees in Belgium? Suppose 

a company from Luxembourg provides cars to Belgian employees. This may make them subject to having to pay VAT in Belgium. Fortunately, before this brings about an administrative nightmare, The Circular has clarified that foreign employers can manage their VAT responsibilities in Belgium through a "VAT one-stop-shop" platform without formally registering in Belgium. 

But note that The Circular has not simply waivered past closed financial years. If those same Luxembourg employers have provided company cars to their Belgian-resident employees in the past, they must retroactively regularize their situation with the Belgian VAT authorities.

Drive smooth VAT processes with VAT IT

In conclusion, if your company provides company cars to employees in Belgium, it's crucial to understand your reporting duties, as your internal car policies could impact how VAT is applied. Reach out to our VAT IT gurus for more clarity and ensure compliance with the regulations, helping navigate the road to maximized VAT recovery.