BENEFITS-IN-KIND LUXEMBOURG: HOUSING - VEHICLES
The assessment and nature of the tax income of benefits in kind granted to employees and shareholders and partners (whether or not they are employees) and in particular the benefits represented by the provision of service or a company car (the latter distinction does not exist in Luxembourg) have just been clarified by the administration of direct contributions in its circular L.I.R 104/1 of 16 July 2018.
1- BENEFITS GRANTED TO EMPLOYEES
a) The assessment of a “housing” benefit-in-kind
Rented by the employer
Amount of the rent, or if the rent is excessive, 25% monthly of the unit value of the dwelling limited to 3/4 of the rent
Owned by the employer
At least 25% monthly of the unit value of the dwelling, but not less than €8/m² for an apartment/studio or €7/m² for other types of dwelling
Rented by the employee and reimbursed by the employer
Amount of rent
The current housing costs (heating, water, electricity, etc.) borne by the employer must be added to the benefit to obtain their actual amount. If the housing is furnished, the monthly value of the benefits is increased by 10%. Any amounts paid by the employee are deducted from the benefit. In all cases, the benefit is considered as a salary supplement and is subject to withholding tax.
b) The evaluation of a "car" benefit
First, it should be noted that the costs relating to the journey to and from work are taken into account regardless of the beneficiary's situation by means of the flat-rate deduction (Article 105bis L.I.R.). Any reimbursement (direct or indirect) is therefore taxable remuneration.
Two types of assessment are possible:
- Assessment at “cost price of the private kilometre travelled”
In this case, the employer must establish and prove the cost price per kilometre taking into account the car provided (depreciation, insurance, tax stamp etc.)
It is also necessary to keep a logbook recording the private kilometres travelled, including the journey to and from work, and regularise them on a monthly basis.
In practice, such an evaluation requires expertise and discipline.
- The flat-rate evaluation
Irrespective of the age of the vehicle, the monthly benefit is set at between 0.5 and 1.8% of the total purchase price (including tax) of the new vehicle.
For example, for a vehicle with a catalogue value minus specific discounts of 30,000.00 euros, the monthly benefit may vary from 150 to 540 euros.
The method of financing the vehicle has no impact on the monthly value of the benefit.
Any fixed flat-rate contribution or contribution per private kilometre of the employee is deducted from the benefit. The fact that the employee randomly pays variable costs (fuel, maintenance, repairs) does not in any way reduce the value of the benefit.
The participation in the acquisition price takes place through an amortisation of the benefit over time, and the amortisation is capped at 20% of the acquisition price.
Here too, the benefit is to be considered as a salary supplement and is subject to withholding tax.
The possible benefit of selling the service vehicle to an employee at a preferential price may give rise to additional taxation. According to the judgments of the Administrative Court, the benefit is capped. This capping is subject to complex rules which have to be examined on a case-by-case basis.
2- BENEFITS GRANTED TO PARTNERS AND SHAREHOLDERS
The evaluation of the benefit is the same as in the case of employees, and only the nature of the income may change.
If the benefit is granted to the partner or shareholder in their capacity as an employee of the company, and if non-shareholder employees benefit from similar benefits, it is considered as income from salaried employment.
If the benefit is granted to the partner or shareholder in their capacity as shareholder, the benefit is to be considered as income from movable capital, subject to withholding tax.
The determination of the actual tax nature of the benefit is the responsibility of the corporate office, which communicates it to the competent personal income tax office.
Finally, it should be noted that the flat-rate evaluation rules cannot be used to determine the benefit of shareholders who assume the day-to-day management of the company.