Fleet News

Worrying times for the Norwegian fleet market

THE Norwegian fleet market is beginning to appreciate the full negative impact of Government changes to the VAT treatment of car leasing introduced at the start of 1999.

VAT-registered companies have always had to pay the full VAT on motor cars because it has always been the Norwegian government's policy to keep them expensive.

But a tax loophole has made the leasing of cars particularly favourable. This loophole has allowed leasing companies, when buying cars to lease to customers, to reclaim the difference between VAT at 23% and Norway's 'investment tax' of 7%, thereby recovering 16% of the price of the car. In return, leasing companies have charged VAT on their monthly leasing rentals.

Historically, the minimum lease period was eight months - so if you leased a car for eight months, and the leasing company charged VAT on eight monthly leasing bills, the car could be sold to a new owner, with no more VAT due (apart from the Norwegian re-registration tax, which on an eight-month-old car would be in excess of €1,000).

This, of course, encouraged a lot of short-term leasing contracts, and was a great advantage for car leasing companies, although most fleet operators still opted for a two-year leasing contract.

But, as of January 1, 1999, the minimum leasing period for a completely VAT-free car purchase was extended to three years. If a leasing contract is terminated before the full 36-month period, however, the VAT charged would only be pro rata, ie if it was terminated after two years, you would only be charged one third of the original VAT amount.

While new car registrations in 1998 were 117,976, 1999 ended with only 101,278, and importers predict about the same for 2000.

Was the fall due to the change in VAT legislation? Fleet sales, or sales to VAT-registered companies, certainly fell from 50,101 in 1998 to 41,851 in 1999, and in 1998 leasing accounted for 31,464 of these sales. In 1999 only 24,076 new cars were leased.

  • Jorgen Seemann Berg is a leading Norwegian motoring journalist. (April 2000)
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