Tax provisions for company cars for employees (leasing)

Update in progress

The provision of a company car (purchased or leased by the employer) is a common practice in Luxembourg and is part of the compensation policy of many employers.

When an employee is provided with a company car for their professional and private use (e.g., trips between the employee's place of residence and their place of work, etc.), the car is considered to be a benefit in kind which is taxable as income from paid employment and subject to social security contributions.

When an employee purchases a company car (owned by the employer or leased with an option to purchase) at a price below market price, the car is also considered to be a benefit in kind which is taxable as income from paid employment and subject to social security contributions.

Who is concerned

All resident or non-resident employees who have a company car for their personal use.

How to proceed

Methods of evaluation

When an employee is provided with a company car for their personal use, the car is considered to be a taxable benefit in kind.

There are 2 methods for evaluating the benefit in kind.

The flat-rate method

The benefit in kind is assessed at a monthly flat rate of 1.5 % of the value of the vehicle when new (including options and VAT) less any discount given by the seller. The evaluation of the benefit in kind is identical for used cars.

Example:

Price of the vehicle when new (VAT and options included, less the discount granted by the seller): EUR 29,000

Taxable monthly benefit in kind: 1.5 % x 29,000 = EUR 435

The monthly benefit in kind assessed using the flat-rate method is subject to withholding tax on salaries and social security contributions as income from paid employment.

The logbook method

The employee keeps a logbook and records the number of kilometres travelled when the vehicle is used in a professional capacity. The number of kilometres travelled when the vehicle is used in a private capacity is therefore equal to the difference between the total number of kilometres travelled and the number of kilometres travelled when the vehicle is used in a professional capacity. The amount of the taxable benefit corresponds to the ratio of the cost of the vehicle and the kilometres travelled, multiplied by the private kilometres. Preferably, this should be calculated monthly.

The monthly benefit in kind assessed using the logbook method is subject to withholding tax on salaries and social security contributions as income from paid employment.

Impact of leasing in the event of dismissal or collection of a pension

In the event of dismissal, the cost of leasing a vehicle that increases the gross taxable income is taken into account for the calculation of severance pay. This increase in gross compensation will also have an impact on the calculation of unemployment benefits. However, the statutory severance pay will not be increased.

Under certain conditions, the amount of pension will be increased if a benefit in kind is received.

Employee contributions to various expenses

There are 2 types of employee contributions to expenses.

Employee contributions to maintenance costs/leasing or rental costs

If an employer provides an employee with a company car in return for a fixed flat-rate contribution (deducted from the employee's net compensation) to the maintenance costs/leasing or rental costs, that contribution will be deducted from the benefit in kind.

However, the contribution to the deductible cost of the lease is limited to 20 % of the cost paid by the employer. The Luxembourg Inland Revenue (Administration des contributions directes) considers that a contribution of more than a 20% to the cost of the lease is motivated by personal considerations.

Example:

Price of the vehicle when new (VAT and options included, less the discount granted by the seller): EUR 29,000

Monthly benefit in kind: 1.5 % x 29,000 = EUR 435

Monthly cost of the lease paid by the employer: EUR 600

Employee's fixed contribution to the monthly cost of the lease (deducted from the employee's net compensation): EUR 150

The employee's deductible contribution to the cost of the lease/rental limited to 20 % x (EUR 600 - EUR 150) = EUR 90. The taxable monthly benefit in kind is 435-90 = EUR 345.

However, variable contributions to the cost of operating the vehicle (fuel, maintenance, repairs, etc.) are not deductible from the amount of the benefit in kind.

Employee's contribution to the purchase price

The employee's contribution to the purchase price of the vehicle does not affect the evaluation of the benefit in kind. This contribution (which is limited to 20 % of the purchase price paid by the employer) can be offset against the value of the benefit by amortisation. The Luxembourg Inland Revenue considers that a contribution of more than 20 % is motivated by personal considerations.

Example:

Purchase price of a new vehicle acquired on 1 October 2011 (VAT and options included, net of the discount granted by the seller): EUR 29,000 euros, including the employee's contribution in the amount of EUR 3,480.

Monthly benefit in kind: 1.5 % x 29,000 = EUR 435

Amortisation of the employee's contribution over 8 months (3,480/435)

For a period of 8 months (October 2011 to May 2012), there is no taxable benefit in kind. From 1 June 2012, the benefit in kind of EUR 435 is subject to withholding tax on salaries.

Purchase of the car by the employee and determination of its value

Employees have the option of purchasing a company car at below-market value. This constitutes a taxable benefit in kind.

Employee purchase of a company car

The purchase by the employee of a company car (belonging to the employer, or on long-term rental or lease with an option to purchase) at a price that is lower than the market price constitutes a taxable benefit in kind and is subject to social security contributions.

The tax base of the benefit in kind corresponds to the difference between the market value of the vehicle at the time of purchase and the price paid by the employee.

Determination of the market value of the vehicle

The evaluation of the benefit raises the issue of having to determine the market value of the vehicle in question. In view of the various factors that may affect this evaluation, and in the interest of tax fairness, the ACD recommends a simplified method for evaluating company car rates when an employee purchases the vehicle.

Example:

Price of the vehicle when new (VAT and options included, less the discount granted by the seller): EUR 29,000

Purchase price paid by the employee (generally 10 % of the price of the vehicle when new in financial leases): EUR 2,900

Age of vehicle: 36 months

Market value of vehicle: EUR 13,050

The benefit in kind of EUR 10,150 euros (13,050 - 2,900) is subject to withholding tax on salaries and social security contributions as income from paid employment.

Forms / Online services

Your vehicles and license plates

To complete your application, the information about you collected from this form needs to be processed by the public administration concerned.

That information is kept by the administration in question for as long as it is required to achieve the purpose of the processing operation(s).

Your data will be shared with other public administrations that are necessary for the processing of your application. For details on which departments will have access to the data on this form, please contact the public administration you are filing your application with.

Under the terms of Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, you have the right to access, rectify or, where applicable, remove any information relating to you. You are also entitled to withdraw your consent at any time.

Additionally, unless the processing of your personal data is compulsory, you may, with legitimate reasons, oppose the processing of such data.

If you wish to exercise these rights and/or obtain a record of the information held about you, please contact the administration in question using the contact details provided on the form. You are also entitled to file a claim with the National Commission for Data Protection (Commission nationale pour la protection des données), headquartered at 1, Avenue du Rock'n'Roll, L-4361 Esch-sur-Alzette.

By submitting your application, you agree that your personal data may be processed as part of the application process.

Véhicules et numéros d'immatriculation

Les informations qui vous concernent recueillies sur ce formulaire font l’objet d’un traitement par l’administration concernée afin de mener à bien votre demande.

Ces informations sont conservées pour la durée nécessaire par l’administration à la réalisation de la finalité du traitement

Les destinataires de vos données sont les administrations compétentes dans le cadre du traitement de votre demande. Veuillez-vous adresser à l’administration concernée par votre demande pour connaître les destinataires des données figurant sur ce formulaire. Conformément au règlement (UE) 2016/679 relatif à la protection des personnes physiques à l'égard du traitement des données à caractère personnel et à la libre circulation de ces données, vous bénéficiez d’un droit d’accès, de rectification et le cas échéant d’effacement des informations vous concernant. Vous disposez également du droit de retirer votre consentement à tout moment.

En outre et excepté le cas où le traitement de vos données présente un caractère obligatoire, vous pouvez, pour des motifs légitimes, vous y opposer.

Si vous souhaitez exercer ces droits et/ou obtenir communication de vos informations, veuillez-vous adresser à l’administration concernée suivant les coordonnées indiquées dans le formulaire. Vous avez également la possibilité d’introduire une réclamation auprès de la Commission nationale pour la protection des données ayant son siège à 1 Avenue du Rock'n'Roll, L-4361 Esch-sur-Alzette.

En poursuivant votre démarche, vous acceptez que vos données personnelles soient traitées dans le cadre de votre demande.

Ihre Fahrzeuge und Nummernschilder

Ihre in diesem Formular erfassten personenbezogenen Informationen werden von der zuständigen Verwaltungsbehörde verarbeitet, um Ihren Antrag erfolgreich abzuschließen.

Diese Informationen werden von der Behörde für den zur Verarbeitung erforderlichen Zeitraum gespeichert.

Die Empfänger Ihrer Daten sind die im Rahmen Ihres Antrags zuständigen Verwaltungsbehörden. Um die Empfänger der in diesem Formular erfassten Daten zu erfahren, wenden Sie sich bitte an die für Ihren Antrag zuständige Behörde.

Gemäß der Verordnung (EU) 2016/679 zum Schutz natürlicher Personen bei der Verarbeitung personenbezogener Daten und zum freien Datenverkehr haben Sie das Recht auf Zugang, Berichtigung und gegebenenfalls Löschung Ihrer personenbezogenen Informationen. Sie haben zudem das Recht, Ihre erteilte Einwilligung jederzeit zu widerrufen.

Weiterhin können Sie, außer in Fällen, in denen die Verarbeitung Ihrer Daten verpflichtend ist, Widerspruch einlegen, wenn dieser rechtmäßig begründet ist.

Wenn Sie diese Rechte ausüben und/oder Einsicht in Ihre Informationen nehmen möchten, können Sie sich unter den im Formular angegebenen Kontaktdaten an die zuständige Verwaltungsbehörde wenden. Sie haben außerdem die Möglichkeit, bei der Nationalen Kommission für den Datenschutz Beschwerde einzulegen (Commission nationale pour la protection des données, 1, Avenue du Rock'n'Roll, L-4361 Esch-sur-Alzette).

Wenn Sie Ihren Vorgang fortsetzen, akzeptieren Sie damit, dass Ihre personenbezogenen Daten im Rahmen Ihres Antrags verarbeitet werden.

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