New rules concerning ‘company car taxation’

The new rules regarding the taxation of company cars, a consequence of the ‘summer agreement’, have meanwhile entered into force. We hereby give you an overview of the new corporate tax rules.

Deduction of car costs

Until 2020, the deduction was determined based on the CO2 emission of the car. This resulted in a deduction between 120% for electric cars and 50% for cars with emissions of more than 195 grams. Fuel costs were deductible for 75%.

As from 2020 (or more correctly: from assessment year 2021 for taxable periods starting from January 1^st  2020) the percentage of deduction is calculated according to the formula:

The coefficient being:

-        1 for diesel cars,

-        0,95 for gas oil car and electric cars,

-        0,90 for vehicles on natural gas < 12 fiscal horsepower.

The deduction is maximum 100% and minimum 50%, except for cars with an emission > 200 grams. For the latter, the deduction is only 40%.

Attention! This new calculation method also applies to fuel costs.

In practice, this leads in many cases to a drastic reduction in the deduction.

Some examples:

Type of car	CO2-emmison	Deduction percentage until assessment year 2021	Deduction percentage from assessment year 2021
Gas oil	60	100%	91,5% (120-(0,5*0,95*60))
Diesel	60	100%	90% (120-(0,5*1*60))
Gas oil	120	80%	63% (120-(0,5*0,95*60))
Diesel	120	75%	60% (120-(0,5*1*60))
Gas oil	147	75%	50,175% (120-(0,5*0,95*147)) limited to50%
Diesel	140	60%	50% (120-(0,5*1*140)) = maximum

 

Benefit in kind

The calculation of the benefit in kind for the private use of a passenger car, made available to an employee by an employer, has not changed. The formula is still:

Only the reference emission has been adjusted. For the year 2021, this is 102 g / km for vehicles with a petrol, LPG or natural gas engine (compared to 111 g / km in 2020) and 84 g / km for vehicles with a diesel engine (compared to 91 g / km in 2020).

The minimum benefit in kind is 1.370 Euro compared to 1.360 Euro in 2020.

Also for the employer nothing changes.  The benefit in kind remains a disallowed expense of 40 % if the employer bears the fuel costs of the car and 17 %, if this is not the case.

Deduction and benefit in kind for ‘fake hybrids’

For hybrid vehicles with plug-in that are purchased as from 1/1/2018 and that only have an energy capacity of less than 0.5 kWh per 100 kg vehicle weight or a CO2 emission of more than 50 grams per kilometre, the CO2 emission will be assimilated to that of the corresponding non-hybrid model with the same fuel (e.g. petrol). If no corresponding model is available, the CO2 emissions of the car are multiplied by 2.5. The limit value for energy capacity can be increased in the future.

The measure became into force from assessment year 2021, so for financial years that start at the earliest from 1/1/2020.

For hybrid cars purchased before 1/1/2018, there will be no change in the CO2 emissions to be taken into account for the calculation of the deduction percentage and for the calculation of the benefit in kind. For these cars, the CO2 value of the hybrid version will continue to apply, even after January 1^st  2020.

Also for normal hybrids (without plug-in), nothing changes.

If you are in doubt whether your vehicle is considered a fake hybrid or not, you can view the list published by the FPS Finances on February 19^th 2020 with an overview of the fake hybrids and the possibly corresponding vehicle.

Be careful with CO2 emissions that are stated on the offer for hybrid vehicles. Depending on the options chosen, it may happen that the CO2 emissions of the final car are higher than stated on the offer, which means that the car can be classified as a fake hybrid.

CO2 measuring method

In the past, the CO2 value of a car was measured under the NEDC method (New European Driving Cycle). Since September 2018, the European WLTP standard (Worldwide Light vehicle Testing Procedure) has been used for this measurement, which leads to higher CO2 emission levels.

Up to and including December 31^st 2020, the lower of the two may be used for the calculation of the benefit and the deduction limitation. This is also the case from January 1^st 2021 on the condition that the NEDC value is stated on the certificate of conformity.

Please note: from  January 1^st 2021, the WLTP value for cars registered for the first time in 2021 in the name of a private person or in the name of a legal entity that is not a leasing company applies for the Flemish road tax and the vehicle registration tax.

Conclusion

In view of the new deduction rules, whereby each car often obtains a different deduction percentage, it is advisable to provide a separate account for each car in the accounts on which ALL costs associated with the car in question are booked. This also applies to fuel costs.