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  • Service: Tax & Legal
  • Type: Business and industry issue
  • Date: 16/09/2013

New rules on deduction of VAT on company cars published 

New rules on deduction of VAT on company cars published

Since 1 January 2013, all VAT taxpayers must limit the deduction of VAT on company cars to their actual business use. In their decision n° E.T. 119.650/3 of 11 December 2012, the VAT authorities provided three methods which companies can use to determine the business use of their company cars (namely (1) keeping a log book, (2) a semi lump sum based on the home-to-work distance and (3) a general lump sum of 35%) (see our previous e-tax flash). An additional decision has been published on 12 September which clarifies some concepts and provides a new method (4) for fiscal ‘light trucks’. 

 

Please find hereafter the main changes.

General - scope and definitions
The VAT authorities first briefly define which vehicles can qualify for the methods, i.e. motorized vehicles destined for the transport of persons and/or goods by road. Certain categories of vehicles are however explicitly excluded such as construction site vehicles and trucks.


The decision provides another exclusion for vehicles which are only used for business purposes or only incidentally for private purposes. This depends on the factual circumstances which the VAT authorities evaluate on a case-by-case basis and for which an advance ruling can be obtained. In this context the example of a vehicle which is only used to visit construction sites is given.


The decision also clarifies the concept of ‘home-to-work’ traffic, which is the distance covered by the user of a vehicle between the home address (or residence) and the fixed place of employment (or place of economic activity). Only the company headquarters or an establishment (branch) qualify as a fixed place of employment or economic activity. Some situations in the construction sector are taken into account.


Company cars
The three methods to calculate the business use more or less remain.  The most important change is that the minimum threshold of four vehicles is abolished, which means that method 3 (general lump sum of 35%) can be used by all taxpayers. This possibility is foreseen as from 1 January 2012.


Furthermore, method 2 (i.e. a semi lump sum based on the home-to-work distance) is only possible in case there is one “fixed” user of a vehicle and only for one vehicle per user. The percentage must be adapted in case of a change in the actual use of the vehicle.


Separate regime for fiscal light trucks
The new decision provides a separate regime for fiscal light trucks. A specific example of a light truck is a pick-up truck.

 

In order to determine the right to deduct input VAT for fiscal light trucks used both for business and private purposes, VAT taxpayers may opt either for the 1st method or for a new 4th method. This new 4th method starts from a general lump sum business use determined at 85%.


It is clearly stated that the lump sum of 85% can only be applied when the light trucks are mainly used for to the transport of goods in the context of the economic activity. Otherwise, a lump sum of 35% can be used.


The lump sums of method 4 are applicable to all fiscal light trucks for at least four calendar years.


Determine the right to deduct input VAT
If a VAT taxpayer decides to apply the first method (log book) or the second method (semi lump sum), the tax authorities allow that a global average is applied in order to determine the right to deduct input VAT. In this respect, separate categories must be determined, for instance a global average for motor cycles and a global average for cars.


Other movable goods
The decision confirms that a general lump sum of 75% business use for other movable goods is not only applicable to those goods but also to their related costs. This lump sum is only applicable for movable goods which are mainly used as a working tool or means of exploitation in the context of the taxpayer’s economic activity.


Entry into force
The above-mentioned clarifications come into force retroactively as from 1 January 2013.

 

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