The EU VAT Directive states, in article 56 paragraph 2 that, from January 1 2013 onwards, VAT has to be imposed on the long-term rental of means of transportation to the final consumer at his residency.
If, for example, the means of transportation, such as a car, is rented to a final consumer for more than 30 days, VAT is to be imposed on this rental at the final consumer’s residency. The registered office of the lessor is not decisive. The same applies for the provision of vessels (for instance sailing boats) if they are rented for more than 90 days. Only with respect to the long-term rental of a sport boat is the VAT imposed at the place where the final consumer uses the boat if the lessor also has its residency there.
Provision of a company car
If an employer provides an employee with a car arising from the employment relationship, this provision is regarded to be a supply against payment from a VAT point of view (barter transaction). If the employee is also permitted to use the company car for private use (such as private trips, travel between home and work and travel home to the family in the case of a double household), this usage is subject to VAT within the framework of the so-called “financial advantage”. Therefore, the employer has to account for VAT.
German point of view
Through the September 12 2013 circular,, the German fiscal authority reacted to the new regulation regarding the long-term rental of means of transportation and made clear that the provision of a company car for private use to an employee is to be regarded as such. Therefore, VAT is to be imposed on the rental at the employee’s residency.
The following rule applies from June 30 2013: If an employee with residency in one of the EU member states receives a company car arising from the employment relationship and is also allowed to use it privately, this provision is regarded to have been realised at his residency. Then, it is no longer necessary to impose VAT in Germany.
Austrian point of view
The Austrian fiscal authority also regards the provision of a company car to be a long-term rental of a means of transportation. This results from the VAT protocol 2013 which is still in draft form but will be finalised and released in the coming weeks. Taxation in Austria commenced operating at the final consumer’s residency as from January 1 2013 due to Austria having implemented article 56 paragraph 2 of the EU VAT Directive on time.
Consequences for the practice
In the case of a German employer and an employee who resides in Austria, the German employer is obliged to be registered abroad and to pay the respective VAT to the tax authorities. The German fiscal authority will not agree to any transitional arrangement concerning this matter. From the fiscal authority’s point of view, German employers are also obliged to immediately implement this regulation from June 30 2013 onwards. Due to the regulation in Austria, however, an obligation to register and pay 20% of Austrian VAT exists as from January 1 2013. Ultimately, this would mean a typical double taxation in the first half of the year. Employers can avoid this kind of double taxation by directly referring to the Austrian point of view from January 1 2013 and imposing VAT in Austria.
The example regarding Austria makes the consequences of this regulation clear. The cross-border provision of a company car leads to a considerable administrative effort for the employer abroad. If the VAT rate in the country where the employee resides is higher than in the country where the employer is established, this regulation will lead to additional expenses for the employer.
Ronny Langer
Certified Tax Consultant, Dipl.-Finanzwirt (FH)
Telephone: +49 (0)89 / 217 50 12 - 50
E-Mail: ronny.langer@kmlz.de
Website: www.kmlz.de
