Have Luxembourg businesses taken the Court of Justice of the European Union’s 2021 ruling seriously enough? In a Luxembourg-Germany case, the European Court of Justice ruled that VAT on a car leased to an employee should no longer be paid in the employee’s country of work, but in the employee’s country of residence when the employee made a financial contribution to the leasing.

This week, we learnt that a number of companies--the number is difficult to establish because of the secrecy surrounding tax issues and the reluctance of companies to see themselves in the spotlight in this way--have been summoned to appear before the court in Saarbrücken. “No comment,” said the German federal judicial authorities, who referred the matter to the Saarland court, which is responsible for these matters and which had not itself contacted us at the time this article was published.

According to our information, although these companies have clearly understood that from 2021 they will have to pay VAT on these cars in Germany and no longer in Luxembourg, they are concerned for the years 2013 to 2021. Why are they concerned? Because the case brought before the CJEU began in 2013 and the German authorities took the view that the companies concerned should comply retroactively from that date.

The three neighbours have set their rules

The subject was on the agenda of an event organised on 13 December by the House of Automobile entitled “What future for the company car in Luxembourg? Understanding the challenges of recent tax and regulatory changes.” In their presentation, a BDO tax partner, Erwan Loquet, and a BDO HR and payroll partner, Sandra Claro, showed a slide consolidating the positions of the governments of the three countries around Luxembourg:

- under a circular that is due to be replaced this year (in 2025), Belgium has set a tolerance of 1 July 2021 and applies a taxable base calculated according to this formula: normal value (rent + expenses subject to Belgian VAT insurance) x “recovery percentage” x “professional percentage.” For example: 1,000 x (100%-35% PP) x PR;

- France, in a letter from the ministry of finance, has set a limitation period of three years, five years in the case of fraud, evasion or bad faith, and uses the normal value (rent and ancillary expenses) as the tax base;

- Germany takes 2013 as a reference, the date of the amendment to the legislation on places of performance (in June 2013), and uses as the tax base: 1% of the gross list price (P) of the vehicle + 0.03% of P per km between the office and the home 0.002% for journeys to the family home when the employee has two homes.

On Friday evening, CSV MP questioned finance minister (CSV) on this subject. Questioned by Paperjam, the MP remained very cautious. “I’m only asking questions. This is not the time to make statements! And if need be, I reserve the right to come back to this issue depending on the ministry’s answers.”

What about reimbursement to Luxembourg?

In his salvo of six questions, the MP raises another problem: that of the attitude of the Registration Duties, Estates and VAT Authority (Administration de l’enregistrement, des domaines et de la TVA, or AED). Does the AED systematically inform companies that are liable for VAT in the country of residence of their employees and, if necessary, invite them to regularise their situation in the country of residence of their employees? And does the administration automatically refund the VAT paid if the taxable business has regularised its situation with the tax authorities in the country of residence of its employees?

Contacted on Thursday evening about the payment of this VAT in Luxembourg and the possibility of a refund for companies that would have had to pay it in Germany, Belgium or France, the Administration de l’enregistrement had not got back to us by the time this article was published.

How many cars are potentially affected and how much money or tax waste for Luxembourg is hard to say. The number of leasing cars potentially involved “is not available information,” says House of Automobile spokesman . “We are talking about the vast majority of contracts.” In his presentation on 12 December, however, he said that “it is estimated that between 40 and 50% of company vehicles (CVs) are used by cross-border commuters, which represents between 10,000 and 12,500 personal vehicle sales each year.”

At the end of December, according to a parliamentary reply from mobility minister  (DP), there were 102,489 vehicles registered by a legal entity, a figure that includes company cars to which the benefit-in-kind scheme applies and all those registered in the name of a vehicle rental or leasing company.

This article was originally published in .