The broad-based Summer Accord (2017) of the Michel government introduced radical changes to our corporate tax system. Corporate tax obviously also covers the car tax regime for companies. Starting from 1 January 2018, and from 1 January 2020 especially, in-depth changes took effect in respect of the car tax regime. Below are the terms and arrangements that now govern the deduction of car expenditures and fuel expenses under corporate tax regulations and income tax law (sole traders/self-employed workers) and the changes made to the benefit in kind.
Both under corporate and under income tax regulations: gram formula
Since 01/01/2020, the law giver has introduced a new gram formula to determine the tax deductibility of car expenditures, which applies under the new corporate as well as income tax regulations.
Under the new corporate and income tax regulations, from 01/01/2020 fuel expenses have been levelled up to become deductible in the same way as the actual car expenditures, i.e. also in consideration of the CO2 emission level of the car according to the gram formula.
Since 01/01/2020, cars with a CO2 emission level of 200 g or higher have been subject to the 40% deduction limitation anyway (even under income tax regulations if that car was purchased/leased/rented before 01/01/2018).
Since 01/01/2020, the deduction of the car expenditures for electric cars has been set at 100% (no longer 120%), with the same 100% tax deductibility applying to the electrical power expenses (instead of 75%).
Under income tax regulations however, an important exception applies to cars that were purchased/leased/rented before 01/01/2018. Since 01/01/2020, the deduction for the car expenditures and fuel expenses first and foremost applies in accordance with the gram formula, albeit with a minimum deduction of 75% for the car expenditures and fuel expenses. Since 01/01/2020, cars with a CO2 emission level of 200 g or higher have been subject to the 40% deduction limitation anyway. For these cars, the 75% minimum rule does not apply.
The so-called ‘fake’ hybrid cars purchased/leased/rented from 01/01/2018 have been stripped of their tax efficient status.
Under income tax regulations, the new rules have been in force since 01/01/2020 anyway.
For companies, the new rules take effect for the financial years starting on 01/01/2020 at the earliest.
For which kind of passenger cars?
The new deduction arrangements for the deductibility of the car expenditures (excl. financing) as well as the fuel expenses apply:
‘Purchased’ = a duly dated and signed purchase order or a sealed lease contract.
The deduction will be implemented at a rate established in application of the formula below:
DEDUCTION % = 120% – (0.5 × coefficient × number of grams of carbon dioxide per kilometre)
in which:
Max. 100%, min. 50%. The rate established in accordance with the formula above is not allowed to be less than 50% or higher than 100%.
40% for carbon dioxide ≥ 200 g/km. For passenger cars with a CO2 emission level of 200 g of carbon dioxide per km or more, the deduction is just 40%. Which means these cars are worse off.
Examples
| Car type | CO2 emission level | Deductibility rate |
| diesel car | 0 g | 100% (maximum) |
| diesel car | 40 g | 100% (= 120% – 20%) |
| petrol car | 60 g | 91.5% (= 120% – 28.5%) |
| diesel car | 70 g | 85% (= 120% – 28.5%) |
| diesel car | 100 g | 70% (= 120% – 50%) |
| petrol car | 120 g | 63% (= 120% – 57%) |
| diesel car | 140 g | 50% (= 120% – 70%) |
| diesel car | 180 g | 50% (minimum) |
CO2 emission level for hybrid cars
Since 01/01/2020, the law giver’s intention has been to fiscally disincentivise the so-called ‘fake’ hybrid cars. These are plug-in hybrid cars capable of covering only a small distance just on their battery. They are popular because of their high tax deductibility for companies and the modest benefit in kind deriving from the private use thereof by the company manager or employees.
The law giver takes aim at hybrid cars (PHEV) whose battery energy capacity is less than 0.5 kilowatt hour per 100 kg of the car’s weight or whose hybrid CO2 emissions exceed 50 g/km. In those cases, we are looking at a so-called ‘false’ plug-in hybrid car.
For these cars, the CO2 emission level to be used is equal to that of the same corresponding model which only has a combustion engine. Where no corresponding model of a particular hybrid model exists, the official CO2 emission level of the plug-in hybrid car is to be multiplied by 2.5.
This has a major impact on the deductibility of the car expenditures and on the way the taxable benefit in kind for that car is established (see below).
Exception: hybrid cars that were purchased (ordered) before 1/01/2018 or whose lease contract was signed before 1/01/2018 do not come under the new rules. For these cars, the carbon dioxide value of the hybrid version continues to apply at all times, including after 1/01/2020.
Energy capacity and car weight
To determine the battery capacity, the figure may be rounded up or down to the higher or lower tenth, depending on whether the one hundredth figure reaches 5 (circular 2019/C/56 of 28 June 2019).
Example: 9 kWh / (1845 kg/100 kb) = 0.4878 => rounded up, this gives us 0.5.
Example: 8.3 kWh / (1845 kg/100 kb) = 0.4498 => rounded down, this gives us 0.4.
As regards the car weight, the vehicle’s mass in running order is the important thing. This information is specified in section 13 of the certificate of conformity.
Corresponding model
The Royal Decree of 5 September 2019 (published in the Belgian Law Gazette of 17-09-2019) put forward a definition of ‘a corresponding vehicle’ (new art. 19 RD/1992 Income Tax Code). The Federal Public (Ministry of) Finance published a list of ‘false hybrids’ and their corresponding vehicles, where applicable. The first list was published on 19 February 2020 (false hybrids list).
A corresponding vehicle needs to use the same fuel, be of the same make and the same model, needs to have the same bodywork type and an engine power that is as close as possible to that of the hybrid model. Where several cars exist that meet these criteria, the type with the highest CO2 emission level is considered to be the corresponding model.
The manufacturer or the importer is to determine the corresponding vehicle for every ‘false’ hybrid they sell at the time when the ‘false’ hybrid is introduced onto the European market. The corresponding vehicle thus identified subsequently remains unchanged for as long as this model is around. The manufacturer or the importer are required to provide this information to the Inland Revenue Service. The Inland Revenue Service will publish the full list on its website.
Only the details included in the European certificate of conformity (European COC) are taken into account to determine the ‘corresponding vehicle’.
Example: a Range Rover Sport P400e PHEV SE emits more than 50 g carbon dioxide (71 g/km). Three other petrol-powered Range Rovers Sport qualify: the 2.0 Si4 S, the 3.0 I6 P400 MHEV HST and the 5.0 V8 Supercharged HSE Dynamic. The ratios between the power ratings of these models (in kW) and that of the plug-in hybrid variant respectively amount to 1.00; 0.75 and 0.57. The 5.0 V8 is to be excluded, as it does not come within the 0.75 to 1.25 range. Of the two remaining vehicles, the 2.0 Si4 most closely approximates the figure ‘one’. Consequently, the CO2 emission level of the Range Rover Sport 2.0 Si4 S will be used to assign a value to the benefit in kind and to establish the cost deduction in respect of the Range Rover Sport P400e SE, i.e. 218 instead of 71 g/km.
BIK arrangements for employees since 01/01/2020
For the ‘false’ hybrid cars purchased/leased/rented from 1/01/2018, the CO2 emission level to be used translates into a higher benefit in kind. In the formula to determine the BIK derived from the private use of such hybrid cars, the same carbon dioxide value determined will be adopted as the one used to determine the deductibility under corporate tax:
‘Purchased’ = a duly dated and signed purchase order or a sealed lease contract.
Example: take a BMW X5 xDrive 40e (313 hp, CO2 emission level = 77 g/km and battery energy capacity = 0.41 kWh per 100 kg car weight). Those who purchased such a hybrid passenger car before 01/01/2018 or who signed a purchase order no later than 31/12/2017 continued to qualify for the low tax benefit in kind after 01/01/2020 (in which case the CO2 emission level remains 77 g/km in the BIK formula) and for the attractive tax deductibility of the expenditures after 01/01/2020.
CO2 emission level according to favourable NEDC norms until the end of 2020
To determine the taxable benefit in kind, up until the end of 2020 it was still allowed to go by the CO2 emission level according to the (more favourable) NEDC norms instead of the new (less favourable) WLTP norms (circular 2019/C/56 of 28 June 2019).
The texts of the tax reform act of 25-12-2017 were published in the Belgian Law Gazette on 29-12-2017.
Since 1 January 2005, employers are required to pay a carbon dioxide contribution for every company car which was also being used by their employees for non-professional purposes. This rule applies to passenger cars and to light trucks (under 3.5 tonnes). It is important to know that the CO2 emission level is the sole parameter. The price of the car, the engine power and/or the number of tax HPs are totally irrelevant.
Exceptions to this rule are:
To determine the annual carbon dioxide contribution, 3 different formulas were devised:
Electrically powered vehicles: a flat rate contribution of 28,17 euros per month.
The minimum contribution for all vehicles is 28,17 euros per month. The right carbon dioxide value of the car is specified in the certificate of conformity of the car concerned. In principle, the contribution is payable on a quarterly basis. The flat rate solidarity contribution is payable regardless of whether the employee himself pays towards his company car and irrespective of the amount of the employee’s contribution.
NEDC or WLTP? NEW FROM 01/01/2021
In a new FAQ, the Inland Revenue Service pronounces itself on the CO2 emission level to be taken into account starting from 1 January 2021.
Since 1 September 2018, all new cars are tested using the WLTP procedure that replaces the NEDC method. Comparing the two procedures, the WLTP is seen to show a CO2 emission level that is approximately 20% higher than the result of the NEDC test.
Nonetheless, the NEDC or NEDC 2.0 carbon dioxide values (for vehicles whose emission levels are now determined in accordance with the WLTP norm) continue to be used to determine the tax regime of company cars, up until 31 December 2020.
The Inland Revenue Service has recently shed clarity on the calculation method of the tax benefit in kind from 1 January 2021.
1. Determining an NEDC 2.0 value no longer compulsory
From 1 January 2021, the car manufacturers continue to be authorised (at their own discretion) to determine an NEDC 2.0 value for WLTP cars, but they are no longer under obligation to do so, except for new passenger cars whose measured NEDC carbon dioxide value is less than 50 g/km.
In practical terms, this means that, from 1 January 2021 forward, there will be vehicles on the road which:
2. CO2 emission level to be used for the benefit in kind
As the legal text does not clarify whether this needs to be the NEDC value or the WLTP value, the Inland Revenue Service is of the opinion that account must be taken of:
| Vehicle | carbon dioxide for BIK |
| one NEDC value (NEDC 1.0) | CO2 value NEDC 1.0 |
| one WLTP value | CO2 value WLTP |
| NEDC 2.0 value and WLTP value | At the tax declarant’s own discretion: carbon dioxide NEDC 2.0 value or CO2 WLTP value |
3. Consultation of the COC
In order to establish whether a vehicle has two CO2 emission levels (WLTP and NEDC 2.0), the vehicle’s COC should be consulted. The certificate of conformity of a vehicle with 2 CO2 emission levels shows a table (section 49.1) with NEDC fuel consumption and carbon dioxide values, as well as a table (section 49.4) with WLTP fuel consumption and carbon dioxide values.
If the COC shows both the WLTP emission level and the NEDC 2.0 emission level, the employer is free to continue to use the NEDC 2.0 value (lower than the WLTP value) to determine the benefit in kind from 1 January 2021.
From 1 January 2021 however, the manufacturers are no longer under obligation to state the NEDC 2.0 value. If they do not, they need to use the WLTP value, which means the benefit in kind will be higher.
4. Pending other rules?
The Inland Revenue Service points out that the above standpoint applies until new statutory regulations are put in place. In other words, this situation remains unresolved…
5. ‘False’ hybrids
One of the elements to determine whether a vehicle is a ‘false’ hybrid is the carbon dioxide threshold of 50 g/km. Because of this threshold, it may be that a vehicle is not a ‘false’ hybrid in 2020 (NED) but will become one in 2021 (WLTP).
The Inland Revenue Service has confirmed that the provisions under point 2 above also apply to the 50 g threshold, which decides whether a vehicle is to be ranked as a ‘false’ hybrid.
So if the hybrid vehicle has an NEDC 2.0 value as well as a WLTP value, the tax declarant has a choice between the NEDC 2.0 value and the WLTP value in order to determine the 50 g/km threshold.
6. What about the social security contributions?
The employer is required to pay a solidarity contribution, which consists of a flat rate monthly sum, for the private use of a company car which he makes directly or indirectly available to his employee(s). This contribution is contingent on the car’s CO2 emission level.
A draft decree on the reform of the road tax (RT) and the vehicle registration tax (VRT) in Flanders was recently published. Below is a word of explanation on these proposed reforms.
The reason for the decree is that– after a transition period during which, in order to determine the CO2 emission level, either the WLTP (Worldwide harmonized Light vehicles Test Procedure) value, or a translated NEDC 2.0 value may be taken into account – from 1 January 2021, only the CO2 emission level measured in accordance with the WLTP will be available.
The purpose of the WLTP is to measure CO2 emission levels more accurately and to approximate actual emission levels more closely. Which is why the WLTP value also factors in a lot of a vehicle’s extras (such as air-conditioning and the type of tyres).
From 2021, only the CO2 emission level based on the WLTP counts.
Aim: greening of the fleet
The Flemish Government is committed to greening the vehicle fleet on Flanders’ roads. The WLTP values are part of this endeavour. On the other hand, the government is keen not to raise the overall tax burden (= budget-neutral): polluting cars will face higher taxes, eco-friendly cars will face less tax.
Starting when?
For new vehicles:
The new calculation method of the carbon dioxide parameter in the RT and the VRT is to be applied only for vehicles that were registered for the first time after 31 December 2020. For these vehicles, only a CO2 emission level measured according to the WLTP will be available (no longer an NEDC value).
For second-hand vehicles:
For second-hand vehicles that were first registered on 31 December 2020 at the latest and which were re-registered after 31 December 2020, the already existing calculation method of the RT and VRT will continue to be applied. All the more so as an NEDC carbon dioxide score is available for these vehicles. Which means there are no changes in the road tax regime for second-hand vehicles (registered no later than 31 December 2020).
New calculation RT
In the new calculation formula, the old threshold of 122 g CO2 (which determined whether the rate is to be increased by 0.30% or to be reduced for every gram of CO2 above or below) has been raised to 149 g CO2.
Watch out for vehicles powered by natural gas and plug-in hybrids with a maximum CO2 emission level of 50 g per km: after 31 December 2020, the exemption in respect of the RT is scrapped. However, the exemption remains in place for vehicles that were registered before 1 January 2021, with a transitional arrangement instituted for vehicles that were ordered before 1 October 2020, but were not registered until after 31 December 2020 (= to be applied for).
New calculation VRT
For vehicles that were first registered before 1 January 2021, the current regulations continue to apply, with the CO2 emission level to be determined in compliance with the European regulations which applied at the time of the first registration.
Current formula: VRT = ((carbon dioxide * f + x) /246)6 * 4500 + c) * LC
For road vehicles first registered after 31 December 2020, the above formula is adapted. Parameter ‘x’ is replaced by a new parameter ‘q’ which takes its position in the formula at the same location as the ‘x’, on the understanding that this is now multiplied by ‘q’, whereas under the old regulations ‘x’ was totted up. In other words, ‘+ x’ becomes ‘* q’.
New formula: VRT = ((WLTP carbon dioxide x f x q)/246)6 x 4500 + c ) x LC
For the details regarding the formula, see the portal site of the Flemish Tax Agency. The initial value of ‘q’ is 1.07 and is set to increase by 0.035 each year between 2021 and 2025.
New arrangements for vehicles powered by natural gas and plug-in hybrids
The adjustments do not apply to vehicle registrations in the name of car lessors and lease companies.
Please note: for the Euro norm correction, a diesel hybrid is equated with a diesel, not with ‘other fuels’.
NEW CALCULATION CO2 EMISSION LEVELS FOR CARS FROM 2021
On 22 April 2020, new European rules came into force for the standard used to establish the carbon dioxide value of a car. As a consequence, this value has gone up since the start of 2021, which is resulting in a much less favourable tax treatment of company cars. However, the Inland Revenue Service is showing goodwill and has put forward a number of nuances. Below is a word of explanation.
What is a benefit in kind?
A BIK is a benefit assigned to you by your employer either for free or for a small fee. This can be anything, such as:
These benefits are considered as professional income. Which means you will need to pay tax over the amount that represents the value of the benefit in kind.
How is the BIK determined?
Of the amount calculated, 6/7 is to be paid by the employee and 1/7 by the employer. The BIK for the employee is determined as follows:
List price x quotient first registration date x length of time used x carbon dioxide rate x 6/7
Specifications:
1. List price of the vehicle in new condition and for private customers
Including:
Excluding:
2. First registration date of the vehicle
This element is applied on a degressive basis. There is an annual 6% reduction of the calculated list price, counting from the second year and with a minimum of 70%.
3. Length of time used
This length of time is determined from the date the motorist is given the use of the vehicle until the penultimate day of his use of the car. The first day is to be counted as a full day, the last day is discounted. In the formula, the length of time used is divided by the number of days of the year of calculation.
4. Carbon dioxide rate
The basic percentage for the calculation is 5.5%. A benchmark emission level of 91 g/km is adopted for vehicles with a diesel engine and of 111 g/km for vehicles with a different type of engine/motor. This benchmark emission level is laid down each year in a Royal Decree.
Where the emission level exceeds the benchmark emission level, the calculation percentage is raised by 0.1% per gram of CO2, up to a maximum of 18%.
Where the emission level is less than the benchmark emission level, the calculation percentage is reduced by 0.1% per gram of CO2, down to a minimum of 4%.
If no CO2 details are available, a flat rate emission level applies:
195 g/km for vehicles with a diesel engine
205 g/km for vehicles with a different type of engine/motor
Some further specifications
If the beneficiary of the benefit is already contributing a portion, this is deducted from the benefit determined in the manner detailed above. No distinction is made between extras (ex-works) and accessories fitted by the dealer but before the vehicle’s registration. The BIK is established in application of the coefficient number of days used/number of days in the year, which may be expressed in a monthly fee to be paid. Which explains why the BIK changes each month.
Recent changes BIK
2023 changes
The benchmark emission level for diesel cars goes down from 75 g/km to 67 g/km. For petrol or gas-powered cars, it goes down from 91 g/km to 82 g/km. The minimum amount goes up to 1,540 euros/year.
2022 changes
The benchmark emission level for diesel cars goes down from 84 g/km to 75 g/km. For petrol or gas-powered cars, it goes down from 102 g/km to 91 g/km. The minimum amount goes up to 1,400 euros/year.
BIK calculation formula
2023 ASSESSMENT YEAR
Company car – 2023 income year
Calculation BIK for the private use of a company car:
Minimum benefit on an annual basis: 1,540 euros
Company car – 2022 income year
Calculation BIK for the private use of a company car:
Minimum benefit on an annual basis: 1,400 euros
New calculation CO2 emission level for cars from 2021
On 22 April 2020, new European rules came into force for the standard used to establish the carbon dioxide value of a car. As a consequence, this value has gone up since the start of 2021, which is resulting in a much less favourable tax treatment of company cars. However, the Inland Revenue Service is showing goodwill and has put forward a number of nuances.
In Belgium, the carbon dioxide emission level of a car impacts the car tax regime. This norm determines the tax deductibility, how the benefit in kind is calculated and also plays a part in whether or not the vehicle is to be qualified as a ‘false hybrid’.
About WLTP and NEDC
The standard to determine the carbon dioxide value has been changed under pressure from Europe. Since September 2018, newly registered cars need to comply with the so-called WLTP norm to establish the carbon dioxide emission level. WLTP stands for Worldwide Harmonized Light vehicles Test Procedure. This test has come to replace the less strict and less realistic NEDC test (European Driving Cycle), which had been used since the 1970s, but came under attack, in amongst other things as a result of dieselgate.
Impact on the car tax regime
The result of the WLTP test is a higher value, which has a negative impact on the car tax regime. A brief sample survey shows that the carbon dioxide emission level of an average family car is around 15% higher in application of the WLTP test. The tax deductibility is believed to fall from 68% to 60% and the benefit in kind is said to go up from 1,400 to 1,850 euros. The effect for a hybrid car which is suddenly qualified as ‘false’ is much greater even.
During a transition period, which ended on 31 December 2020, car manufacturers were required to specify a converted NEDC value in their certificates of conformity, i.e. the NEDC 2.0. From 1 January 2021, they are still allowed but no longer under obligation to do so.
Relevance of carbon dioxide emission level
The carbon dioxide emission level is relevant from a tax perspective for the following elements:
1. Tax deductibility
Since the start of this year, the tax deductibility under income tax as well as corporate tax regulations is determined in application of the so-called gram formula:
120% – (0.5 x fuel coefficient x carbon dioxide)
The fuel coefficient is 1 for diesel cars, 0.95 for electric and petrol cars and 0.90 for natural gas-powered cars. For a lot of new cars, this new formula is already resulting in a lower tax deduction compared to the deduction categories which were in place up until the end of last year.
2. Benefit in kind
The benefit in kind over which an employee/company manager is taxed when he is given the use of a company car is established in accordance with the formulas below (2022 assessment year):
For diesel cars:
List price x (5.5 + 0.1 x (carbon dioxide – 75)) /100 x 6/7
For petrol / natural gas-powered cars:
List price x (5.5 + 0.1 x (carbon dioxide – 91)) /100 x 6/7
3. The ‘false hybrid’ qualification
For so-called ‘false hybrids’, the rule is that the carbon dioxide emission level of the non-hybrid counterpart is to be adopted. This is established based on the ratio of the weight and the capacity of the battery (capacity of less than 0.5 kWh per 100 kg car weight) on the one hand, or again based on the carbon dioxide emission level (more than 50 g). The Inland Revenue Service recently published a list of ‘false hybrids’, specifying the corresponding vehicle for each model in order to determine the CO2 emission level.
Inland Revenue Service shows goodwill
Because the impact of the new WLTP norm on the car tax regime is considerable, a transition period was put in place during which the NEDC values were allowed to be used as far as 2020. Obviously, this is just a stay of execution, with tax increases still looming large from 1 January 2021 for the same car. However, the Inland Revenue Service showed goodwill by publishing a clarification in January and again in March 2020, albeit subject to the possible introduction of new laws and regulations.
So what are the practical implications of the Inland Revenue Service’s position?
1. Tax deductibility
If the car was registered before 2021 (and for which the NEDC norm was still specified on the certificate of conformity), this NEDC CO2 emission norm may continue to be used after 1 January 2021. The deductibility of the car expenditures faces no negative impact. Conversely this will be the case for cars that are registered from 2021 forward and for which only the WLTP norm was established.
2. Benefit in kind
If the WLTP norm were to be applied for the calculation of the benefit in kind starting from 2021, this would result in a higher benefit in kind for the same company car, which means higher tax. In theory, this will now not be the case for company cars registered before 1 January 2021.
3. ‘False hybrid’ qualification
It may be that a car is qualified as a ‘false hybrid’ in application of the WLTP norm, whereas this was not the case under the NEDC norm. The hefty tax increase that comes with this requalification would be an unpleasant surprise for people who purchased a car before 2021 in the belief that they were buying a ‘real hybrid’. These buyers can now rest easy.
Which means this supplementation is good news for tax payers. As long as the NEDC norm is stated on the certificate of conformity, it can be used. In practice, the WLTP norm for tax purposes will only be used for newly registered vehicles after 1 January 2021.
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