New circular provides clarity on Belgian VAT for company cars offered by foreign employers

Sep 5

In Belgium, company cars are well ingrained in remuneration policies for tax reasons.

VAT on expenses (such as purchase, lease, fuel, maintenance costs, etc.) related to (freely provided) company cars can be deducted in Belgium in proportion to their professional use (as per Article 45, § 1quinquies of the VAT Code). However, the VAT deduction must never exceed 50%, even if professional use is higher (Article 45, §2, first paragraph of the VAT Code).

In Belgium, employers generally do not require employees to contribute (though this doesn't preclude possible taxation as a benefit in kind for direct taxes). If an employee does contribute, the VAT deduction is typically 50%, and no further deduction limitations apply. The flip side is that VAT must be paid on that contribution. The higher normal value serves as the minimum base for taxation.
In other countries, the VAT treatment may be different. In many jurisdictions, VAT can be fully deducted, and VAT adjustments are made via a correction for private use (e.g., at year-end).

Practice shows that employers are increasingly making company cars available in cross-border contexts, especially in border regions where employees live abroad.
Due to recent European case law (C-288/19, 20.01.2021), it has become evident that this can lead to foreign VAT obligations.

European case law (QM v. Finanzamt Saarbrücken, C-288/19)

This case concerns an employee residing in Germany who received a company car from a Luxembourg-based company. Germany considered providing the company car for personal use as a long-term rental of a means of transport, where VAT is payable in the country where the employee resides (Article 56, Paragraph 2 VAT Directive 2006/112/EC).

An essential condition for considering a taxable supply is that the transaction must be carried out against consideration. This means that there must be a legal relationship between the service provider and the recipient of the service, involving mutual exchanges, and the compensation received is the actual consideration for the service rendered

In this case, the Court ruled that there cannot be a supply against consideration for the use of a vehicle when:
(i) The employee does not make any payment for using the vehicle.
(ii) The employee does not sacrifice a part of their remuneration as compensation.
(iii) The employee's right to use the vehicle is not contingent on foregoing other benefits.

On the other hand, there can be a taxable "rental of a means of transport" if the situation involves an exchange against consideration (for an agreed duration of more than thirty days), where the employee has a permanent right to use the vehicle for personal purposes and can exclude others from its use.

Administrative Circular 2023/C/72

The Authorities acknowledge that this case law has created uncertainty and intend to provide clarity and eliminate uncertainties via a circular. Foreign employers are expected to remit Belgian VAT on company cars provided for private use to employees residing in Belgium (for over 30 days), provided it's done for consideration.

Concept of "consideration"

The circular adopts the conditions from the aforementioned case law and concludes that in the following situations, it will be assumed that there is a supply against " consideration":
(i) Payment by the staff member to the company,
(ii) Withholding of a portion of the remuneration by the company,
(iii) Debiting from the current account of the company's manager, director, etc., up to the amount of the agreed remuneration, or
(iv) A choice by the staff member between various benefits, offered by the company, where the right to use the company car implies the waiver of other benefits.

Taxable amount

Regarding the taxable amount, foreign employers must adhere to the Belgian VAT rules concerning the normal value (Article 33, § 2, VAT Code). Specifically, this means that the taxable amount should be determined as follows (points 158 and 159 of Circular AAFisc No. 36/2015 (No. E.T.119.650) dated 23.11.2015):
• For leased vehicles: (Lease cost excl. VAT + Expenses excl. VAT) x (% Deduction - % Business Use)
• For purchased vehicles: ((Purchase price excl. VAT / 5) + Expenses excl. VAT) x (% Deduction - % Business Use).

However, for mixed taxpayers, an additional limitation (up to the applicable pro-rata) may come into play.

Administrative tolerance

The administration emphasizes that European case law is interpretative and should, in principle, be applied retrospectively. Nevertheless, the administration has chosen to impose these rules as a concession only starting from July 1, 2021. This date coincides with the implementation of the OSS system, allowing foreign employers to remit VAT in their respective countries from then on, thus eliminating the need for separate and costly foreign VAT registration.

This tolerance does not apply to situations where the consideration consists entirely of a payment by the employee to the company (where the full amount is deducted from the net salary).

Regarding the past, concerning the provision of company cars for which the VAT liability arose in a concluded fiscal year, the amount of the consideration is regarded as an amount inclusive of VAT for VAT regularization.


It is evident that providing company cars to employees in a cross-border context can lead to VAT obligations abroad and additional complexity. This circular contributes to clarifying VAT obligations for foreign employers who provide company cars to personnel residing in Belgium. When a vehicle is provided for valuable consideration (for a period longer than 30 days), it's expected that Belgian VAT will be remitted.

Foreign employees should retrospectively regularize their VAT situation for the period starting from July 1, 2021, through an OSS declaration or a standard VAT registration.