At the beginning of October 2012, the Belgian tax authorities have published a new update of their FAQ (Frequently Asked Questions) relating to company car taxation. The comments include a section on salary splitting (in case an employee is taxable on his salary in more than one jurisdiction).
It is positive to note that the authorities follow the general opinion that it is, under certain circumstances, possible to also split the car benefit between Belgium and another country. Whether such splitting actually needs to occur will depend from a number of circumstances, such as the (partial) employment by an employer outside Belgium and the cost allocation (relating to the car) to the foreign employer.
We do not follow the opinion of the tax authorities, where they mention that the car should also be used outside Belgium in order to split the car benefit. In case the car is only used in Belgium, no splitting of the benefit should be possible according to the authorities.
In our opinion, the condition of the use of the car outside Belgium, is not in line with the Belgian general tax legislation in respect to the taxation of benefits in kind. Indeed, the company car taxation relates to the private use of the vehicle. In case an individual obtains a company car from a foreign employer and makes private use of the car in Belgium, the benefit still relates to a foreign employment situation. Therefore, the car benefit should be exempt in Belgium. The country in which the car is actually used for private purposes is not relevant.
The same occurs in case an employee obtains a company car from a Belgian employer and uses it for private purposes abroad: also in such case, the car benefit remains fully taxable in Belgium.
One can assume that the tax authorities mainly refer to commuting activities (between the employee’s home and his fixed place of employment) with the company car. This is, however, not a logical situation, since many employees with a salary split do not use their car for commuting, but use a more economical and efficient means of transportation (for example high speed trains). Notwithstanding such use of public transportation, their company car can still relate to a foreign employment (and be tax exempt in Belgium).
In any case, it is important in case of a salary split, to consider the company car and to make a correct allocation of the car benefit between Belgium and the other countries. The starting points of the allocation will be the split ratio between the countries (based on the physical work location) and the allocation of the car costs. It is recommended to clearly indicate the car allocation in the employment contract and in other supporting documentation.
Finally, we can remark that it is quite remarkable to note the volume of the comments, issued by the Belgian tax authorities in respect of the (short) legislation on company car taxation and the volatility of such comments. The comments of the authorities not only have exceeded the limits of a ‘normal’ interpretation of the law, but on several occasions, they have tried to change the law or to add new elements to the law. In this way, they have exceeded their authority, which unfortunately is likely to lead to a number of taxation disputes in the future. Nevertheless, the law as such will always prevail over the opinion of the tax authorities.