The Value Added Tax (VAT) treatment of private use of company cars by employees has undergone a significant change following a decision by the Court of Justice of the European Union (CJEU) in 2021. The case in question, C-288/19, has implications for employees who reside in an EU member state different from their employer’s. This decision has particular relevance for Luxembourg, where many employees commute from neighboring countries.
According to the CJEU ruling, when an employee sacrifices part of their remuneration for a company car, the employer is deemed to provide a service, and this supply is subject to taxation in the employee’s member state of residence. The tax base for the salary sacrifice arrangement is generally determined by the employer’s cost in providing the car.
In response to the CJEU decision, Luxembourg VAT authorities have issued circulars to provide guidance on the implementation of the ruling. Similarly, Belgium has issued a circular acknowledging the decision and offering guidance on its application. However, France has not yet provided an official position on the implementation of the CJEU decision.
It is worth noting that Germany has required the registration and filing of VAT returns since 2014. However, so far, VAT authorities have not imposed penalties or interest for past due payments. It remains to be seen if this approach will continue in light of the CJEU decision.
In light of these developments, employers should carefully consider the implications of the CJEU decision, assess its impact on their car policies, and take the necessary actions to address any VAT obligations in other member states.
It is important to seek professional advice and review the original source material to ensure compliance with the new VAT rules. Local specialists can provide valuable insights and guidance tailored to specific circumstances.
Please note that this article was partially generated with the assistance of AI. While AI can be helpful in producing content, it is always advisable to review the original source material and seek advice from experts in the field to ensure accuracy and compliance with local regulations.