Coordination Committee clarifies VAT treatment of employee benefits, leaves open symbolic payment issue

For gratuitous provisions, it is always necessary to assess whether the personal needs of the employees prevail over the needs of the employer and their economic activity. This will particularly be important for supplies covered by the Income Tax Act under the term ‘supplies provided by the employer to create and comply with work conditions for the performance of work’. Unlike the paper’s submitters, the GFD believes that the supplies included in this category cannot automatically be considered as not having the characteristics of personal consumption. In the GFD’s view, it is necessary to assess in these cases individually whether the personal consumption component prevails over the requirement to perform the employer's activity or vice versa. This may also be crucial for supplies that are explicitly included in this category for personal income tax purposes by the Information on the Taxation of Benefits and Other Supplies Provided by Employers (e.g., provision of sports equipment such as billiard tables, climbing walls, etc.).

The second part of the paper deals with benefits provided for consideration. The discussion conclusions clearly show that where an employee benefit is provided for consideration, the basis for paying VAT is the consideration amount (an exception from 1 January 2025 is the supply of immovable property). At the same time, the employer is entitled to deduct VAT on the taxable supplies received. The fact that the consideration received from the employee is possibly (even significantly) lower than the value of the purchased supply is not usually decisive for the application of VAT.

According to relevant case law, however, an exception could be the situation where the payment from the employee is symbolic. In such a case, the supply could then be reclassified as a supply without consideration without the right to deduct VAT. The crucial question is what constitutes a symbolic payment, or, more precisely, what payment amount should no longer be considered symbolic. The paper in its underlying rationale assumes that a payment of 10% of the costs incurred for the supply would not be a symbolic payment, in line with CJEU decision C-267/15 Gemeente Woerden. However, the financial administration has not accepted this general assumption on the grounds that the circumstances of a particular case must always be considered and that the threshold for a symbolic payment can therefore not be set with general applicability.

This conclusion particularly goes substantially beyond the issue of employee benefits discussed above.

Wherever a consideration for a supply provided (not only to employees but also within standard supplier relationships) is significantly lower than the costs incurred for such a supply, we recommend assessing the VAT treatment and any potential VAT impacts in advance.