Circular letter on the deductibility of car costs


In a circular letter dated 15 July 2014 (see link below), the Belgian Minister of Finance, Koen Geens, has elaborated on the tax deductibility of the costs relating to cars being put at the disposal of third parties in the hands of whom the corresponding benefit in kind is considered to be taxable.

For Belgian personal tax purposes, the costs relating to the use of cars are only 75% deductible.

For Belgian corporate tax purposes, the deductibility of the costs depends on the CO2 -emission of the car concerned.

To avoid double taxation, the amount of the benefit in kind that is taxable in the hands of the third party will not be considered as a cost relating to the use of a car. Hence, the abovementioned deductibility limitations will not come into play as regards the part of the car costs which is the equivalent of the taxable benefit in kind.

As a consequence, the Minister of Finance suggests applying the abovementioned principle as follows:

  • For Belgian personal tax purposes: the benefit in kind has to be deducted from the total amount of the car costs. The result thereof will be subject to the abovementioned 75% limit.
  • For Belgian corporate tax purposes: the benefit should be split up in a part relating to the fuel costs and a part relating to all other car costs. The fuel costs are, except for the part thereof corresponding with the benefit in kind, tax-deductible at 75%. The deductibility of the other car costs, deducted with the part of the benefit in kind, depends on the CO2 emission.

Note that the recommended calculation method was already commonly used in practice.

The circular letter is applicable to costs incurred as from 1 January 2012.

Link to circular letter.