The corporate tax reform that was announced last week as part of the reform package aims – once more – at strengthening the rules on the taxation of company cars for Belgian companies.
The following update highlights some of the measures in this respect. Most of these measures should only apply as from 2020, with no retroactive effect.
In general, under the current system, the deductibility rate of car costs in the hands of Belgian companies and Belgian PEs varies in a range between 50% and 120% of the costs, depending on the type and the CO2 emission of the company car. The deduction for fuel costs is fixed at 75%.
It is our understanding that these rules would change as follows:
- The deductibility rate of the car costs would in general be more closely linked to the exact (actual) CO2 emission level of the car. The current system in which the deductibility rate is the same for a given range of CO2 emission levels would no longer be applied (e.g. under the current system, for diesel cars with a CO2 emission level of between 106 and 115 g/km, the deductibility rate is fixed at 80%). And likely the deductibility percentages as such would also be decreased.
The same rule would apply to so-called “fake” hybrid cars (plug-in hybrid cars where the battery is actually hardly ever used and has limited range), with in reality relative high CO2 emission levels, but not in theory because of the use of a rechargeable electric battery. Under the current rules, the car costs for these cars can easily be deductible at 90 or 100% because of the posted low CO2 emission level. Under the new proposed rules, however, the actual high CO2 emission level would imply a less favorable deductibility rate. It is the battery capacity of the car (in relation to the weight of the car) that would help to determine whether a rechargeable hybrid car is “fake” or not. For these cars the taxation of the corresponding benefit in kind is currently usually also low(er) hence we can expect that this will increase as well.
For highly polluting cars, the deductibility would be limited to 40%, starting already in 2018. It is not clear yet when a car would be defined as a highly polluting car.
- The deduction for fuel costs would no longer be fixed (at 75%) but would also be linked to the CO2 emission of the car.
- Car costs that were deductible for 120% (e.g. costs in relation to electric cars) would only be deductible for 100%.
- Also note that the above rules should equally apply to self-employed persons for personal income tax purposes.
The deduction of company car costs is one element that is important when (re)assessing a company’s mobility policy. Another element is the recently agreed introduction of a mobility budget, as an alternative for company cars (cash for car). Read the newsflash on cash for car here.
Remark: The above announced measures will have to be formalised in draft legislation which should only be available as from September/October. Only then will full details be known.
Don’t hesitate to visit regularly our tax reform website for more information when it is made public.
For any questions you can contact your local PwC contact, Patrick Boone or Evi Geerts.