Circular No. 807-1 – Provision of Company Cars to Employees and VAT Implications

Circular 807-1 – QM stop provision of cars to employees and repeal 807bis

Summary: This circular, issued by the Luxembourg Administration of Registration, Estates, and VAT, clarifies the VAT treatment of company cars made available to employees. It replaces Circular No. 807bis (April 2023) and builds upon Circular No. 807 (February 2021), incorporating the implications of the European Court of Justice ruling in case C-288/19 (QM v. Finanzamt Saarbrücken).

Key points include:

• Provision of Cars as Taxable Services: When an employer provides a car to an employee, it is considered a taxable service. If the employee pays for the car, sacrifices salary, or chooses it over other benefits, the provision is deemed to be for consideration (i.e., not free).
• VAT Base and Valuation: The taxable base must reflect either the actual payment or at least the normal value, which includes lease payments or depreciation over five years, plus related costs.
• Cross-Border Rentals: If the employee resides in another EU country, the VAT must be applied in that country. Luxembourg-based employers can use the OSS (One-Stop Shop) system for compliance.
• Retroactive Adjustments: Employers may retroactively adjust VAT declarations if they reclassify the car provision as a cross-border rental, provided the tax periods are not time-barred.

Source pfi.public.lu

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