Luxembourg Issues New VAT Rules for Company Cars, Eliminates Professional vs. Private Use Distinction

• Circular 807‑1, issued on October 21, 2025, repeals Circular 807bis and changes VAT treatment for company cars.
• The distinction between “professional” and “private use” for VAT deduction is eliminated; all turnover is now fully subject to VAT.
• Companies can now fully recover input VAT on company cars using the direct allocation method.
• Employees using company cars for employer purposes are considered to provide a distinct service and may be reimbursed for related expenses.
• The CJEU previously ruled that long-term private use of company cars by employees is subject to VAT in the employee’s country of residence.

Source: kpmg.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

---

---