New legislation in Belgium will clear the way for Belgian fleets to exploit cross-border leasing opportunities.
On October 1, 2001 Belgian vehicle registration rules will change to ensure that any person or business resident in Belgium who wishes to drive a car on the public highway must register the car with the Belgian authorities, even if the car is registered abroad.
This will make the vehicle user liable for Belgian vehicle taxes, such as registration tax (which can reach almost €5,000 for the most expensive vehicles), road tax (which can reach a maximum in excess of €1,300 a year), and compensatory excise duty for diesel vehicles (which can exceed €1,200 a year).
These tax revenues will benefit the Belgian Treasury, and the question for international fleets is whether the cost of these Belgian vehicle taxes exceeds the VAT advantages of cross-border leasing.
The Belgian VAT rate is 21%, compared to 15% in neighbouring Luxembourg, and lessees can only recover 50% of the VAT charged on car lease rentals in Belgium, while Luxembourg allows 100% VAT recovery.
This had encouraged Belgian-based companies to lease cars out of Luxembourg, taking advantage of the European Court of Justice ruling in the ARO Lease case in 1997. These cars had Luxembourg licence plates and were liable for Luxembourg road taxes.
Bart Vanham, senior manager in PricewaterhouseCoopers' VAT Automotive Group, said the Belgian Government had strongly opposed cross-border leasing into the country, 'and through Customs took repressive action, especially during the summer of 2000'.
He added: 'Due to the legal uncertainty both on VAT and the registration issue, cross-border leasing was, apart from exceptional cases, no longer operated. With the introduction of this new decree, and earlier in 1997 the ARO Lease Court case this uncertainty has disappeared. Cross-border leasing therefore has no legal barriers.'
Fleet News Europe understands that a draft European union directive is under discussion that would close cross-border leasing tax loopholes by preventing VAT payers from deducting more VAT on cross-border leasing than they would receive if they rented cars from their domestic markets.
The latest moves by the Belgian Government are sure to be closely studied by other EU member states that feel they are losing road tax revenue through cross-border leasing arrangements. (September 2001)