Judges have stated that national governments cannot insist workers' company cars be registered in their home country, rather than where a company and its fleet management is based.
The case involved a Belgian national, Hans Van Lent, who worked in neighbouring Luxembourg. He was accused of breaking Belgian criminal law by driving a company car registered in the Grand Duchy while remaining a resident in Belgium, from where he commuted.
He contested the charge and has won, with judges saying EU rules promoting cross-border working trumped Belgian concerns about possible losses of car tax revenue and safety.
A spokesman for the British Vehicle Rental and Leasing Association said the ruling would be welcomed by continental fleet managers wanting to keep all their cars registered in their home country.
He added: 'If the employer is based in a certain country, then the control and management of their vehicle fleet would be in that country irrespective of where the driver lives – that would be irrelevant.'
He said where national licensing authorities forced such a company to re-register cars in the home country of a foreign commuting worker it would be an immense problem, adding: 'It would lead to all sorts of annoyances. When you resold the vehicle, you might have to re-register it. It would be nonsense to have them registered here, there and everywhere.'
However, the ruling is likely to have limited impact in mainland Britain, because of the difficulty of driving to work via the Channel Tunnel or ferries. Motorists spending more than six months in the UK in a year must register their cars in the UK.
Even in Northern Ireland, the province's driving licence authority has had no complaints from residents driving company cars registered in the Republic.