22 Dec 21

BIK for company cars in Luxembourg faces transitional period as of January 2022

The country of Luxembourg is preparing for a change in its taxation of the benefit in kind (BIK) for company cars. The new regime will be deployed gradually, following a four-step plan. 

As of next year, a transitional period will be activated. The final tax model will be put in place as of the 1st of January 2025.

The chronology of the plan is as follows:

  • Current scheme (A): benefit in kind taxed at a flat rate of 0.5% for EVs and 0.5% to 1.8% for combustion engines depending on CO2 emissions (and a ceiling at 150 g/km). For any vehicle ordered before 31/12/2021 and registered before 31/12/2022.
  • Transitional period 2022: vehicles ordered and registered in that year follow the current scheme (but only for that particular year). Delivered in 2023, scheme B applies.
  • Scheme B: the BIK of EVs is taxed according to consumption. Below 18 kWh/100 km the flat rate lies at 0.5%, otherwise it’s 0.6%. Depending on CO2 emissions the flat rate for combustion engines fluctuates between 0.8 to 1.8%, with a lowered threshold at 130 g/km. This rule is valid for orders as of 01/01/2022 with registration between 01/01/2023 and 31/12/2024.  
  • As of 01/01/2025 all company cars will be taxed at 2%. Except for EVs which will be rated at 1.0% or 1.2% depending on consumption (scheme C). 

The final scheme (C) embeds a significant rise of the taxable BIK for company cars, both with electric drivelines as with a combustion engine. Anyone wishing to benefit from the current scheme (A) for the full duration of the leasing contract, orders will need to be placed urgently. Only a few days remain.

Plug-in hybrids are on a losing streak. They still enjoy a bonus in Luxembourg with a ceiling of €3,000, but that subsidy will be closed on the 31st of March 2022.

The House of Automobile, a national umbrella organisation for all the automobile associations, has requested a dialogue with Minister of Energy Claude Turmes. They want him to extend the funding of plug-in hybrids, which they regard as a necessary step towards electrification.

Image courtesy of Shutterstock

Authored by: Piet Andries