Luxembourg VAT authorities clarify VAT treatment of company cars

  • The VAT treatment of company cars has been clarified by the VAT authorities in Luxembourg through the publication of Circular N°807bis, which clarifies the VAT treatment set out in Circular N°807 following the CJEU’s decision in QM v Finanzamt Saarbrücken (case C-288/19).
  • The new circular clarifies that the supply of a vehicle by an employer is considered a taxable supply of services, even if the employer and employee have agreed on a specific car budget or criteria for determining costs. The taxable amount for leasing a means of transport is the remuneration received by the lessor, and for services supplied by an employer to its employees, VAT must be calculated on the “normal value” or “open market value” of the service provided.
  • The new circular also allows Luxembourg taxpayers to retroactively amend their VAT returns for up to five years to apply the correct VAT treatment. The provision of a company car to an employee for private use is considered a taxable benefit in kind, and discussions are ongoing to potentially review the benefit in kind calculation. Companies providing company cars to employees should assess their reporting obligations and monitor neighboring countries’ tax authorities’ response to the latest circular.

Source Arendt

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