The updated tax law: what does this mean for your fleet?
The updated tax law: what does this mean for your fleet?
The future of the company car. The fight against CO2. The greening of the fleet. New mobility. These are all smoking hot topics that keep the fleet manager awake and we often zoom in on these topics in this blog. As we are doing now!
What exactly is the situation regarding the updated tax law in this area? What impact will this change have on your fleet? And what can you do now? Here are a few takeaways from our November 2021 webinar.
Why a new tax law for company cars?
Climate neutral by 2035. That’s the European Green Deal in a nutshell. Today (2021), the average CO2 emissions of new cars in Europe may not exceed 95 grammes. In 2025, however, this will drop to 81g, in 2030 to 59g, and end up at 0 by 2035. In order to achieve these objectives, our government decided in May 2021 to adopt a number of tax measures that will take effect from 2023.
"600,000 electric cars whizzing along Belgian roads is the vision for the near future"
Note that many companies have already included electrification in their CSR policy. And there are growing trends supporting the tax change relating to company cars, such as ever more teleworking, mobility as a service and the mobility budget for those who do not want a company car.
This is all about giving a strong boost to the “greening” of the fleet and new mobility. In particular, electric driving is encouraged, and fossil fuels are discouraged. Company cars with combustion engines will lose their tax advantage in time. This also applies to plug-in hybrids.
Car taxation in our country is relatively complex. This is reason enough to take a closer look at the tax changes. The great interest in the webinar in this regard proves that there are still many questions about it!
Precisely which taxes are changing?
It is not about one tax change but about a package of adjustments to tax law. Opting for the electric company car remains just as interesting and the “fossil choice” becomes quite a bit more expensive. All this is gradually introduced and/or removed. The decisive factor is always the vehicle order date.
In summary, this concerns:
- Electrical vehicles remain 100% deductible if ordered by the end of 2026, after which this percentage decreases.
- Systematic increase in tax on disallowed expenses (non-deductible costs) for cars that emit CO2, including PHEVs.
- The CO2 contribution will increase significantly for vehicles with CO2 emissions in the coming years.
- The minimum CO2 contribution will change from 2025, also for zero-emission vehicles and mobile contracts.
- The mobility budget is expanding and more flexible.
- Tax support for charging infrastructure.
The principle of Benefit in Kind (BIK) for the employee remains unchanged, as does the:
- Vehicle first registration tax (VFRT)
In Flanders, a 100% electric car is exempt from vehicle first registration tax. In Brussels and Wallonia, you pay the minimum rate of EUR 61.50.
- Road Tax
As with the VFRT, 100% electric cars in Flanders are exempt from road tax. In Brussels and Wallonia, you pay the minimum of 83.95 euros per year.
How much tax benefit for electric company cars?
It is clear that the tax authorities favour the 100% electric car. All electric cars (both battery-electric and hydrogen-electric) ordered up to and including 2026 are and will remain 100% tax-deductible. This applies not only to the car itself, but also to financing, “fuel”, parking costs, etc.
As of 2027, this deductibility will decrease in order to strengthen the fight against traffic jams and to stimulate alternative mobility. Carbon emission-free cars will be 95% deductible if ordered in 2027, 90% if ordered in 2028, 82.5% in 2029, 75% in 2030 and 67.5% in 2031.
The CO2 contribution, you as an employer pay to social security, also shows a great preference for electric cars. For fossil fuel company cars, this so-called “solidarity contribution” is being significantly increased. From 2023, the contribution will be multiplied by a factor that gradually increases according to the current calculation method.
- For vehicles that emit CO2, the contribution will increase in the coming years by a factor of 2.25 to 5.50 in 2027.
- Calculated contribution x 2.25 from 1 July 2023
- Calculated contribution x 2.75 from 1 January 2025
- Calculated contribution x 4 from 1 January 2026
- Calculated contribution x 5.50 from 1 January 2027
- For all cars, including zero emission cars, the minimum contribution will increase in the coming years to the following amounts*:
- EUR 23.42 in 2025
- EUR 25.99 in 2026
- EUR 28.57 in 2027
- EUR 31.15 as from 2028
* Please note: these amounts are also subject to indexation, which currently amounts to x 1.4.
Alternatives for those who do not want a company car are also supported. The mobility budget that includes all kinds of alternatives to the individual car will be simpler, broader and more flexible, with even more possibilities. Even up to and including a pedestrian premium for commuting.
Alphabet is a partner from A to Z for this new mobility budget as well.
How much longer will there still be a tax benefit for fossil fuel company cars?
The tax change is definitely happening, but for now, everything remains unchanged. Existing contracts remain unchanged. You will continue to benefit from the current tax deduction for fossil fuel cars for as long as they run.
Company cars ordered after 30 June 2023, however, will fall under the new regime.
A transitional arrangement will start on January 1, 2023. For plug-in hybrid cars ordered from that date, the current deductibility remains in force, but the deductibility of the cost for fossil fuel for the use of a plug-in hybrid is limited to 50%. (Electricity does however enjoy the high deductibility). The reason is obvious: the tax authorities want to encourage electric driving with the plug-in hybrid.
For all cars that emit CO2, i.e. fuel cars and plug-in hybrid cars, which are ordered as of 01/07/2023, the deductibility decreases gradually to a maximum of 75% in 2025, 50% in 2026, 25% in 2027... and 0% as of 2028.
What about the charging infrastructure?
Electric driving is often still a matter of: “Yes, would love to, but...”. A commonly heard objection is: will there be enough charging stations to reach my destination? This is precisely why the government supports the installation of charging stations in the workplace. Anyone who invests in a charging station between 1 September 2021 and 31 August 2024 can expect an increased cost deduction. Until 31 December 2022: 200%, from 1 January 2023 to 31 August 2024: 150% An important condition: the charging station must be freely accessible to third parties for part of the day. Hence the term “semi-public”.
The government also encourages the installation of charging stations at home. Until 31 December 2022, this will result in a tax reduction of 45%, 30% in 2023 and 15% in 2024. This applies both to tenants and to owners, based on a maximum investment of EUR 1,500 per charging station and per taxpayer.
Last but not least, they must also be “smart” charging stations that can control charging time and power and, in the case of a private individual, also work on green electricity.
What impact does this have on your costs?
The biggest “yes but”? This usually involves the purchase or rental price of a fully electric vehicle. It is usually higher (or even much higher). But the offer is also growing in the middle class in terms of price, with almost every brand now focusing on these fully electric vehicles. And for a correct price assessment, it is certainly necessary to look at the total price, the Total Cost of Ownership (TCO) including tax.
Tax deductibility has a major impact on this TCO. This also makes opting for electric more financially attractive. Paying corporation tax on rejected expenses for diesel or petrol cars will certainly be tangible, read: unpleasant. In contrast, for electric vehicles, the higher purchase or rental price is significantly offset by the tax benefit.
What can you do now?
As we said, no stress. You can still choose the cars in accordance with current tax law until 30/06/2023. What was ordered before that date continues to fall under the current tax law for as long as the car is running. This gives you time to prepare for the next period with the new tax law. Also take into account that the advantageous regime of plug-in hybrid cars for orders from 01/01/2023 is being moderated by the limitation of the deduction of the fossil fuel cost to 50%.
"A major advantage of this tax change? You can prepare for it. This has not always been the case with previous tax measures!” – Stijn Blanckaert, car journalist and tax specialist.
You can find the one-pager on taxes from Mobia at Febiac, who made a resume of all the current tax rules, here:
Take the time to perform the necessary calculations for your fleet. Applied mathematics that are indispensable for your fleet policy and planning for the coming years.
Would you like to do this together with an Alphabet expert?
Feel free to let us know, you can count on us!