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02Feb

Possible opportunity to recover VAT on fringe benefits

 

ECJ decision – 20 January 2005 – Case C-412/03 (Hotel Scandic Gasaback AB v. Swedish VAT Authorities)(*). Major impact of the VAT treatment of fringe benefits when the beneficiary is charged part of the taxable value associated with that benefit.

Context:

When employers grant their employees fringe benefits (e.g. company cars), the employees will as a rule be deemed to have received taxable income to the extent the benefits have been granted free of charge. To date, VAT has been charged on the taxable amount arising by reason of the grant of a fringe benefit, regardless of whether the employee was charged a fee in order to receive that benefit. The ECJ decision does not say anything new as regards where fringe benefits are granted free of charge or for a consideration at least equal to their taxable value. By contrast, the decision is of the utmost importance where the employee is charged part of the taxable value associated with the benefit.

News

Following the ECJ decision of 20 January 2005, if the employer charges the employee an amount offsetting only part of the taxable value associated with a given benefit, the portion of the taxable value that is not offset by that consideration will be out of the scope of VAT.

Opportunity: VAT recovery

In all cases where EU companies have charged their employees a portion of the taxable amount associated with a fringe benefit (which obviously includes having a company car), only that portion will be subject to VAT.

Any VAT paid on the portion of the taxable amount for which the employee has not been charged may be refunded provided that the prescription period has not expired, i.e. in Belgium, VAT paid in the period dating back to 2002.

In the future, as long as no derogation is requested and obtained by the Belgian State, VAT is only due on the actual consideration received from the employee for the fringe benefit (e.g. private use of a company car). However, please note that, if the employee is not charged for the benefit or is charged a consideration equal to the taxable value associated with the benefit, VAT is due on that taxable amount.

(*) http://news.hrservices.be?lk200502021

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Posted: February 2nd, 2005