Posted: 06 Sep. 2023 2 min. read

VAT guidance issued on cars provided by foreign employers to resident employees

Tax Law | Legal Newsflash

On 1 September 2023, the Belgian VAT authorities issued Circular 2023/C/72 (Dutch | French) updating the VAT treatment of company cars provided by foreign employers to employees living in Belgium. With retroactive effect as from 1 July 2021, these cross-border supplies may be treated as the hiring of a means of transport for consideration, subject to certain conditions, with potential Belgian VAT implications for the foreign employers. Organisations providing company cars to Belgian-resident employees may wish to assess whether their vehicle policies are within the scope of these new rules and take the necessary action where appropriate.  


Generally, when an employer provided an employee with a car that was used at least partially for private purposes, this was considered as a “self-supply” and subject to VAT in the employer’s member state, regardless of the employee’s member state of residence. In Belgium, the most common approach to the taxation of company cars with private use was to limit the employer’s input VAT deduction, other than in a limited number of situations where the employee pays for the private use of the vehicle.

This interpretation has been updated following case C-288/19, where the Court of Justice of the European Union (CJEU) ruled that the provision of a car by an employer to an employee should be considered as the hiring of a means of transport, and treated as made for remuneration when all of the following conditions are met:

  • The employee provides any payment for the use of the car; 
  • The employee gives up a part of their remuneration as consideration for the car;
  • The ability to use that vehicle is not contingent on the employee forgoing other benefits; and
  • The employee has the right to use the car for private purposes and to exclude other persons from using the car, for an agreed period of more than 30 days, and the car remains permanently at the employee’s disposal, including for private purposes.

Although business-to-consumer (B2C) supplies of services are generally taxable in the member state of the supplier (the employer), under article 56(2) of the EU VAT directive, the hiring of a means of transport is taxable in the employee’s member state of residence, when this is different to the employer’s member state. Therefore, for example, if an employer in Luxembourg provides company cars to staff residing in Belgium, the employer must consider the VAT implications in Belgium as well as in Luxembourg.

If these conditions are not met, the vehicle would, in principle, be considered as a self-supply subject to VAT in the employer’s member state.

Key points of Circular 2023/C/72

The circular reiterates the content of the CJEU’s judgement and its implications for cars put at the disposal of employees residing in another member state. The circular addresses various aspects of the application of the decision in depth. This alert focuses on three key areas: the persons covered, the taxable base, and the date of entry into force; however, the circular provides many detailed rules, and a careful analysis is therefore necessary.

Covered persons

In addition to employees, the circular also applies to managers and directors of companies, who have a current account with the company.

Tax base

When an employer has leased a vehicle, the tax base is the rent paid plus any other costs incurred under the terms of the lease agreement. For vehicles owned by an employer, the tax base is one-fifth of the acquisition price of the car, plus any other costs applied on purchase. This base figure must be multiplied by the difference between the employer’s input VAT deduction percentage and the percentage of professional use of the car (which may be determined based on one of three methods, including the general lump sum method with a percentage of 35%). An employer choosing the lump sum method, with the right to full input VAT deduction, would therefore pay Belgian VAT on 65% of the tax base (100% less 35%). 

Entry into force

Technically, the interpretative rules for CJEU decisions would normally imply that the principles laid down in the relevant case would apply as from 1 January 2013, and Belgian VAT would therefore be due as from this date, when the circumstances of an employer-provided car meet the relevant conditions.

However, considering good administrative principles, the circular fixes the effective date of the new VAT treatment as 1 July 2021. This date provides the practical advantage of coinciding with the date when the use of the Union One Stop Shop was enlarged to include wider supplies of B2C services. This allows the foreign employer to avoid the need to register for VAT and file VAT returns in Belgium.

Deloitte Belgium comments

Foreign employers should review whether the provision of company cars to employees residing in Belgium would be considered as made for remuneration, and therefore subject to Belgian VAT. In this respect, the circular indicates that it is necessary to examine each car policy on a case-by-case basis, and that the concept of rent should be understood in a broad sense of the term. As the circular provides many detailed rules, a careful analysis is necessary to ensure the correct application.

Key contacts

Joaquim Heirman

Joaquim Heirman


Joaquim is a Director at Deloitte Legal, specialising in all VAT matters. He has over 10 years of experience in advisory services including guiding companies through administrative and court procedures. The majority of his clients are privately held companies and include real estate developers, law firms, health care suppliers and governmental institutions.  Since 2009 he is a member of the Brussels bar. He published regularly on VAT matters and lectures at the KULeuven (University Leuven) on VAT aspects of real estate and is research assistant at the UGent (University of Ghent).