According to the current rules on the VAT treatment of company cars, the professional use of a car should be established based on one of the following three methods and no longer on the advantage in kind calculated for direct tax purposes.
Method 1: the “actual professional use” method;
Method 2: the semi-fixed calculation method based on a lump sum number of working days (200) and private km’s (6000 km); and
Method 3: the lump sum VAT deduction of 35%.
The professional use can never be higher than 50% as Belgian VAT legislation foresees in a general VAT deduction limitation of 50%.
The Belgian VAT authorities have now published an extensive Circular Letter which summarizes the current rules but also provides more guidance on the application thereof and covers some new tolerances. The most remarkable guidelines and tolerances are the following:
- Directors (not subject to the VAT regime) of a company which are domiciled at the same address of the company’s registered seat, do not have home-work km’s (which is deemed to be private use for VAT purposes) and therefore, the use of method 2 will lead to the maximum VAT deduction of 50%;
- A professional use of less than 10% is deemed to be an insignificant professional use. In such case, method 2 nor 3 can be applied.
- When only a fuel card is put at the disposal but no company car, the VAT deduction is determined based on the factual circumstances, taking into account the VAT deduction limit of 50%;
- Car dealers should in principle perform a VAT taxable self-supply when they use stock cars for test drives (cars with a “green” license plate);
- Sales representatives are assumed to have at least 50% professional use. Therefore, they are not obliged to keep a logbook when the company applies method 1.