All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Provision for a company car abroad to become more expensive


The German fiscal authority will impose VAT on the cross-border provision of a company car at the residence of the final consumer. This means that an employer now has to pay foreign VAT if employees have their residence in another EU member state and receive a company car that is also for private use.

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



more across site & bottom lb ros

More from across our site

The Biden administration is about to give $80 billion to the Internal Revenue Service to enhance the tax authority’s enforcement processes and IT systems.
Audi, Porsche, and Kia say their US clients will face higher prices under the Inflation Reduction Act after the legislation axes an important tax credit for electric vehicle production.
This week Brazil’s former President Luiz Inacio Lula da Silva came out in support of uniting Brazil’s consumption taxes into one VAT regime, while the US Senate approved a corporate minimum tax rate.
The Dutch TP decree marks a turn in the Netherlands as the country aligns its tax policies with OECD standards over claims it is a tax haven.
Gorka Echevarria talks to reporter Siqalane Taho about how inflation, e-invoicing and technology are affecting the laser printing firm in a post-COVID world.
Tax directors have called on companies to better secure their data as they generate ever-increasing amounts of information due to greater government scrutiny.
Incoming amendments to the treaty could increase costs on non-resident Indian service providers.
Experts say the proposed minimum tax does not align with the OECD’s pillar two regime and risks other countries pulling out.
The Malawian government has targeted US gemstone miner Columbia Gem House, while Amgen has successfully consolidated two separate tax disputes with the Internal Revenue Service.
ITR's latest quarterly PDF is now live, leading on the rise of tax technology.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree