Belgian Company Car Taxation in 2018: an overview
Knowing that complex taxation can significantly influence the Total Cost of Ownership of the average company car in Belgium, it is no surprise that the recent changes in car taxation have fleet managers ask questions about their fleets and what to do in 2018 and beyond. Fleet Europe presents a comprehensive overview of the changes in company car taxation with comments from BDO.
Fiscal Deductibility for companies and independent professionals
With deductibility of car costs still based on tables introduced in 2010, an adjustment of the current system was to be expected. However, for 2018 and 2019, the fiscal deductibility of all car-related costs will remain unaltered for companies, with a continued use of the current tables with deductibility values between 50% and 100% (and 120% for fully electric cars) in accordance with the CO2-emissions.
What will change from 2018 is that independent professionals, always having had a fixed 75% deductibility up till now, will see their deductibility follow the table used for companies, though with a minimum of 75%. This means an improvement for some, and stability for most.
Real change will only occur from 2020 onwards, when all independent professionals as well as companies will see the company car cost deduction being determined following a (new) formula.
|Fiscal deductibility of new and already acquired vehicles = |
120% – (0.5% x coefficient x CO2/km)
- For diesel (and diesel hybrids) the coefficient is 1.
- For CNG the coefficient is 0.90 (with a maximum of 11 fiscal HP)
- For all other fuels and engines the coefficient is 0.95.
- Fiscal deductibility of car cost can never be higher than 100% (abolition of the 120% for EV’s).
- Fiscal deductibility must be a value between 50% and 100%. From 0 to 40 g/km CO2 the maximum of 100% deductibility is maintained, from 140g on, the percentage will be 50%.
- As an exception to the general rule, for cars with emissions over 200g CO2/km the fiscal deductibility will be set at 40%.
Example for a diesel with 105 g CO2/km: 120 % – (0.5 % x 1 x105 g) = 120% - 52.5 % = 67.5% instead of the current 90%.
Furthermore, for the first time, from 2020 onwards, the deductibility of fuel costs will no longer automatically be 75%, but will logically follow the general deductibility of the car costs related to CO2 emissions.
These new rules apply to all vehicles ordered from the 1st of January 2018 onwards. Cars ordered and/or registered before that date will forever keep their deductibility based upon the existing table.
Erwin Boumans (BDO): These changes are another step towards the greenification of company car fleets, but won’t be sufficient. Even with this new calculation method, diesel cars still have an advantage because of the use of CO2 emissions as sole criterium with only a coefficient to adapt the outcome. This correction is expected to remain insufficient for a total switch towards alternative fuels, other than diesel or even petrol.
The problems for the switch to other technologies remain: the high purchase cost of alternative fuel vehicles (e.g. only 321 private persons applied for a premium from the Flemish government after acquiring an EV last year), a lack of (charging) infrastructure and the “anxiety” related to range and charging possibilities of EVs. Intermediate steps towards full electrification remain necessary (fuel cell, hybrid…).
Companies have mobility issues: company cars are still a fiscally interesting alternative for salary and the country’s infrastructure is not yet suited for alternative mobility due to the dispersed character of habitation and the lack of efficient public transport infrastructure.
There also is a problem that has not been tackled yet in the reactions on these changes in deductibility. From 2020 in, accountants will have considerably more work in treating the fiscal declarations of the car-related costs since there will be an individual calculation per car, instead of per category in the current system. It must be said that this is a long way from a simplification of company management.
A new rule was put in place for the deductibility of plug-in hybrids from 2020 on. They can only use their official CO2 emission value (NEDC) for the taxation calculation if they have a sufficiently large battery. Therefore, the government decided that the ratio between battery capacity and total vehicle weight, in kWh per 100 kg, must be at least 0.5, with the added condition that the car cannot emit more than 50g CO2/km in order for the official emission value to be used. So not all plug-ins can use their official emission for the taxation calculation.
If the obtained figure exceeds 0,5 kWh/100 kg, the value of the corresponding petrol or diesel version (non-hybrid) has to be used for the calculation. If there is no such alternative version, the official CO2-emission of the plug-in must be multiplied by 2.5.
All plug-in hybrids that have been ordered before 1 January 2018, can forever keep the old deductibility rate of 100% (for CO2 emissions equal to or below 60 g/km).
Boumans (BDO): The last-minute modification of the battery versus weight ratio from 1, over 0.6 to 0.5 is a good thing. Because plug-in hybrids are a first step towards alternative fuels and emission-free driving it would have been regrettable if the measure had been put in place without modification, as this could have meant the end of plug-in hybrids in Belgium. Of course, a better measure would have been to put in place an obligation to regularly recharge the batteries of plug-in hybrids, as this is the key differentiator, which would however have been difficult to monitor in real life.
CO2-based social security contribution
As is the case every year, the formula for the calculation of the social security contribution based on the CO2 emissions of company cars that are also used for private purposes is indexed. For 2018, the formula to obtain the monthly amount due is as follows:
- Diesel: [((CO2 x €9)-600)/12]x 1.2708
- Petrol: [((CO2 x €9)-768)/12]x 1.2708
- LPG: [((CO2 x €9)-990)/12]x 1.2708
- EV and hydrogen cars: 20,83 x 1.2708 = € 26.47
For 2018, the minimal monthly contribution is € 26.47.
Boumans (BDO): Once more, the sole criterium used is CO2. This is unfortunate because values such as the “Ecoscore” would be a better base for taxation. The new WLTP emission calculation may allow an adaptation of the calculation methods. The fiscal deductibility formula can easily be adapted to these new figures. Using CO2 as a sole criterium is outdated.
While the principle of the BIK for the private use of company cars remained unchanged for petrol and electricity-powered cars, it is slightly modified for diesels. The new formulas are as follows:
- Diesel: Fiscal List Price x [5.5 + ((CO2-86) x 0.1)]% x 6/7 x age coefficient
- Petrol, LPG, CNG: Fiscal List Price x [5.5 + ((CO2-105) x 0.1)]% x 6/7 x age coefficient
- EV: Fiscal List Price x 4% x 6/7 x age coefficient
The age coefficient is calculated from the date of first registration. During the first year, it is 100%, from the 13th to the 24th month it is 94%, with a further lowering of 6% per year until the vehicle has reached the age of 61 months, from which moment the coefficient will remain 70%.
The minimum yearly amount to be considered for the BIK is € 1.310, which is 2.3% over the 2017 amount.
Boumans (BDO): The fact that the referential value for the calculation of the BIK for petrol cars remains at 105g and does not rise, provides a correction towards petrol and discourages diesel. A good first step, though most likely insufficient to really have a genuine effect.
Disallowed expenses BIK
Employers will, and this remains unchanged, have to take into account a percentage of disallowed expenses based upon the BIK of their employees’ company cars. This percentage remains 17% for cars where no intervention in the fuel cost for private use is paid, and will continue to be 40% for cars where the fuel cost for private use is paid by the employer.
Boumans (BDO): Not all business owners are aware of the cost of this aspect. Luckily, the promised lowering of the corporate tax from 33.99% to 25% or even 20% for SMEs means that this additional cost will be somewhat lower when effectively put in place, as will be the final effect of the fiscal deductibility changes. However, it is strongly advised to check the actual (cash) impact of the combination of these measures on your own organisation, in order to assess whether an adjustment of your car policy would be required to be cost neutral.
Cash for Car / Mobility Allowance
As we speak the whole project is under review by the government, since the Council of State rejected the first proposal. There is no news yet about the modifications the government is planning in order to get final approval.
Boumans (BDO): It remains unclear what the result will be. It is a difficult matter but the rejection by the Council of State was justified. Companies ask for a simple, uniform and harmonised mobility budget that doesn’t necessitate rulings and individual approval. The initial plan did not comply with that wish (although it was contested by the Council of State on other grounds). Hopefully the next one will.
More information about the tax calculation and deductibility of company cars for businesses in Belgium in Dutch or in French.