The future of vehicle fleets in Luxembourg and its neighbouring countries is currently a hot topic. On the one hand, in terms of the environmental impact for all vehicles, and on the other hand, in terms of tax and VAT for mixed vehicles only (commercial vehicles are not affected).

Following the ruling of the Court of Justice of the European Union in January 2021 (C-288/19: Case QM v Finanzamt Saarbrücken), many thoughts and analysis has been going on for almost 3 years regarding the provision of vehicles by employers to their employees.

As a reminder, by this ruling, the Court of Justice of the European Union considers that making available of a vehicle for the private use of an employee by the employer could, under certain conditions, be considered as a transport hire (B2C - long term) subject to VAT in the employee's country of residence in accordance with article 17.2.7.b of the VAT Act.

This affair, which still reveals a number of grey areas, has led to a number of reactions from Luxembourg and its neighbouring countries.

  • Germany, which is at the origin of this case following a Circular published in 2014, is following the interpretation of the Court of Justice in a drastic way.
  • The Grand Duchy of Luxembourg reacted in February 2021 with the publication of its Circular 807 followed, more than 2 years later, by Circular 807bis in April 2023 in order to provide some additional clarifications, in particular on the conditions of application of the judgment and the notion of tax base.
  • In September 2023, Belgium issued its Circular 2023/C/72, which also provided certain clarifications, in particular concerning a retroactive effective date of July 1st, 2021 and a proposed calculation method.
  • To date, France has taken no position on this issue.

As a result, even though these interpretative texts provide some clarification, questions remain to this day. It is nevertheless necessary for each employer to consider the potential applicability of "QM" within his company. We believe that an in-depth analysis, depending on the case, may be necessary with regard to VAT itself, but also to the payroll and legal aspects associated with it.

In this context, we would remind you that a dedicated team to this issue has been set up at In Extenso Belux to discuss the potential impact on your organisation and also to assist you, if you wish, in your analyses and possible steps.