The salary car and VAT in 2022
June 2022 – Salary cars are subject to a special VAT regime. And a particularly complex one at that. When Covid-19 changed the way we work, the tax authorities granted tolerances. The tax authorities are now reversing their position, but in order to cancel these tolerances, a new tolerance is needed.
Business travel vs. private travel
If you provide your employees with a company car, which they can also use for private travel, this results in a benefit in kind that is taxed as remuneration.
The number of kilometres driven privately with the car is irrelevant.
However, such a wage car also has VAT consequences, and in this respect the number of kilometres driven privately on the one hand and professionally on the other is important.
The term "private travel" undoubtedly evokes, and rightly so, shopping, family visits, holidays, etc., whereas "business travel" refers to journeys made by the worker to a building site, to a customer, etc.
However, it is often forgotten that the tax authorities do not consider home-to-work journeys as business trips, even if they are clearly related to the job. At least not in the eyes of the employer. In other words, commuting to and from work does constitute business travel for the employee, but not for the employer.
Deduction of VAT
Where a vehicle is purchased as a commodity, VAT is obviously deductible by the purchaser. If the vehicle is not subsequently sold, but is used privately by the trader, the deducted VAT must be reviewed and refunded. If the vehicle is purchased for business use, the VAT becomes 100% deductible again. Consider vans used for the delivery of goods.
If the vehicle is also used partly for private purposes, the VAT deduction must be adjusted accordingly. Passenger cars that are suitable for both passenger and goods transport are presumed to be always used for private purposes. The VAT deduction on such vehicles can never be higher than 50%. VAT on a passenger car is therefore always deductible up to a maximum of 50%, but if the percentage of business use is less than 50%, the deduction is obviously limited to this lower percentage.
Determining the percentage of private versus business use
How do you determine the deduction percentage? There are three methods.
Method 1: you keep a daily log of journeys.
Method 2 or semi-fixed method: you calculate the business use using the following formula: % private use = ((home-work distance x 2 x 200 + 6,000) / total distance) x 100. The percentage of business use in this case is equal to 100% - the percentage of private use.
Method 3 or flat rate method: the business use is set at a flat rate of 35%.
You can combine methods 1 and 2, using one for one vehicle and the other for another.
You cannot combine the flat rate method with the other methods. If you choose this method, you must also use it for at least 4 years.
And then the Covid-19 came along
With the arrival of Covid-19 and the compulsory or strongly recommended teleworking, the number of business and private kilometres has decreased. Entrepreneurs who used the semi-fixed method for their car fleet were disadvantaged: in this calculation method, private use (which includes travel to and from work) is estimated on a fixed basis: the fact that in 2020 and 2021, workers were working much more at home than in the office had no impact on the deduction percentage.
The Minister of Finance therefore decided that entrepreneurs who used the semi-fixed-rate method (method 2) could, for the calendar years 2020 and 2021, use the fixed-rate method (method 3) with a business use of 35%. These contractors were also allowed to combine the semi-fixed method with the flat-rate method, which is normally prohibited.
End of the pandemic
But now that workers are increasingly going to their place of work again, the semi-fixed-rate method is probably becoming more attractive than the 35% fixed-rate method. At the end of March, the tax authorities therefore decided that taxpayers who had been using the tolerance method could once again switch to the semi-fixed-rate method.
This is not quite in accordance with the rule, as you were in principle required to use the flat-rate method for at least four calendar years. The administration now confirms in a circular that you can switch back to the semi-fixed-rate method, but that you are not obliged to do so. You should therefore get out your calculator before making use of this new tolerance.
