The “dividend of the car” has been circulating in VAT consultancy practice for years as a solution to save VAT. Eea works in short as follows:
– The BV of a DGA purchases a car.
– The input tax on the car is deducted (if the BV carries out activities that entitle the holder to deduct input tax).
– After some time, the car is sold to the DGA for a relatively low amount (hereinafter: “invoice value”).
– A dividend in kind is paid for the difference between the actual value of the car and the invoice value. The BV will bear the dividend tax.
– The BV only pays VAT on the invoice value.
Pursuant to European case law, dividends do not qualify as compensation for performance. In this way, a car with a relatively low pre-pressure can end up in the DGA’s private sphere.
Source: vatvibes.com
For an interesting German development, see this post.
