Taxation of company cars

The taxation of company cars was established in the law on the fiscal and social greening of mobility dated November 2021. Upon its launch, we bundled everything you need to know in this white paper and infographic. We also reflected on the various changes in our webinar. If you would like to watch the webinar again, click on this link.

  1. CO2 contribution

    If employees are also allowed to use their company cars for private purposes, the employer has to pay a CO2 contribution (also known as a solidarity contribution) to the National Social Security Office (NSSO). This contribution is based on the vehicle's CO2 emissions and fuel type, and is calculated using a formula. In addition, a minimum contribution is determined.

    The formula for calculating the CO2 contribution is as follows:[((CO2 emissions x €9) - 768 (petrol) or 600 (diesel) or 990 (LPG)/12] x index coefficient

    The index coefficient and minimum contribution are adjusted annually. For 2024, the index coefficient is 1.5359 and the minimum contribution is €31.99 per month. The minimum amount is payable for zero-emission cars.

    For non-zero-emission cars ordered from 1 July, the result of the formula calculation must be multiplied by a multiplier that increases annually. In 2024, this multiplier stands at 2.25. If, after applying the multiplier, the calculated CO2 contribution is lower than the minimum contribution, the minimum contribution shall apply.

  2. Benefit in kind (BIK)

    Anyone driving a company car and who is permitted to use it for private purposes enjoys a benefit in kind (BIK). However, an employee pays taxes on this benefit in kind. The amount of the benefit in kind is calculated using a formula that takes into account the vehicle's list price, age and, above all, CO2 emissions. The more the CO2 emissions of an employee's vehicle deviate from the 'reference emission level', the higher the benefit in kind. For zero-emission cars, the minimum CO2 percentage of 4% shall be applied.

    The reference emission level is calculated each year using the average emissions of newly registered cars in the previous year. A minimum benefit in kind is also set each year. For 2024, the reference emission level stands at 78 g/km for petrol cars and 65 g/km for diesel cars. The minimum benefit in kind for 2024 is set at €1,600 per year.

    The formula for calculating the benefit in kind is as follows: List value x CO2 percentage x 6/7 x age percentage

  3. Deductibility of company cars

    Company car costs are (partially) deductible from a company's taxable income and therefore lead to lower corporation tax.

    The deductibility in 2024 varies depending on the type of costs and the type of car:

    Interest costs, including non-recoverable VAT: 100% deductible; this applies to zero-emission and non-zero-emission cars • Vehicle costs, including non-recoverable VAT (financing, maintenance, tyres, insurance, etc.) • Zero-emission cars: 100% tax-deductible • Non-zero-emission cars: the deductibility is calculated using a formula

    Energy costs, including non-recoverable VAT (fuel costs, electricity costs)

    • Zero-emission cars: electricity costs are 100% tax-deductible • Petrol and diesel cars: fuel costs track the deductibility of the vehicle costs • Plug-in hybrids ordered before 1 July 2023: fuel and electricity costs track the deductibility of the vehicle costs • Plug-in hybrids ordered from 1 July 2023: fuel costs are 50% deductible; electricity costs track the deductibility of the vehicle costs

    This formula is used to calculate the tax deduction: 120% - (0.5% x coefficient x CO2 g/km)

    The coefficient stands at 1 for diesel, 0.90 for CNG cars ≤ 11hp, and 0.95 for all other drive types.

    The minimum and maximum tax deductions are limited. In order to accelerate the transition to an electric fleet, the limits will be adjusted in the coming years:

    • For non-zero-emission cars ordered before 1 July 2023, the minimum limit stands at 50% (40% for cars with emissions ≥ 180g/km), while the maximum limit stands at 100% • For non-zero-emission cars ordered between 1 July 2023 and 31 December 2025, the minimum limit will disappear from 2025. Furthermore, the maximum limit will also gradually be reduced from 2025. The maximum limit will stand at 75% in 2025, 50% in 2026 and only 25% in 2027. Non-zero-emission cars ordered from 1 January 2026 will no longer enjoy tax breaks. • Nothing will change for zero-emission cars until the end of 2026. They will retain their tax breaks. The tax deduction for zero-emission cars will only fall from 2027 onwards. The major difference compared to non-zero-emission cars is the 'grandfather clause': the deduction percentage that is valid at the time of the order remains valid for the rest of the term.

Frequently asked questions

Does the reduced tax deduction also apply to existing lease contracts? The new fiscal measures only apply to orders for non-zero-emission cars for which the lease agreement was signed from 1 July 2023.Which date is used to determine whether a company car is subject to the reduced tax deductions or not? The order date or the date of registration? In the case of leasing, the date on which the lease agreement is signed shall take precedence. If you are purchasing the car, it is the date on which the order form is signed by the dealer that is key. The date of registration does not come into the equation for a lease or purchase.Suppose I order a petrol car in May 2023 and I'm still driving it in January 2026. Will the tax deduction for this car continue to apply or not? Tax deductions will be phased out for cars purchased or ordered from 1 July 2023, and will disappear completely for cars purchased or ordered from 1 January 2026. Nothing will change for the petrol car in the example above. It will continue to benefit from the 'old' tax rules.Suppose I order a diesel car on a four-year lease on 1 August 2024. What will happen from 1 January 2026? As the car would be purchased after 1 July 2023, the tax deduction percentage will decrease gradually year after year from 2025. In 2024, the minimum and maximum limits (50% and 100%) will continue to apply. In 2025, the maximum limit will fall to 75%, to 50% in 2026 and 25% in 2027. In terms of the CO2 contribution, it is subject to the multiplier that increases on an annual basis. What will happen to the benefit in kind? The formula for calculating the benefit in kind (BIK) will not be affected. However, the benefit in kind may be higher due to the higher WLTP value.Is there any tax relief for private individuals who have a charging station installed? Yes, a private individual who has a charging station installed before the end of September 2024 can benefit from one-off tax relief. However, this tax relief comes with cumulative conditions. The charging station must be installed by a recognised body in the immediate vicinity of the residential property, it must be a smart charger linked to an energy management system that can manage the charging times and charging capacity, and it must be fully supplied by green electricity. Eligible costs are limited to €1,750 for a one-directional charger and to €8,000 for a bidirectional charger. The tax relief stands at 15% and relates to costs connected with the purchase, installation and inspection of new charging stations.My company is having charging stations installed at employees' homes. Does a higher tax deduction percentage apply for these costs? These costs are not included in the incentive for higher tax deduction. If the charging station is included in the car's lease contract, these costs will be subject to the usual tax deduction rules for electric cars. This figure stands at 100% for cars ordered in 2024.My employer makes a home charging station available and reimburses the electricity used to charge the car at home. Will this affect my benefit in kind? No, the provision of the home charging station and reimbursement of electricity costs have no impact on the car's benefit in kind. The home charging station must have a specific communications system that communicates to the employer how much electricity is used. Furthermore, the reimbursement of electricity costs is also included in the car policy.

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