With new initiatives in prospect, it is worth repeating the existing rules on the deductibility of car expenses for corporate tax purposes [1]:
In personal income tax, work-related car expenses are subject to the same rules. Only cars purchased before 1 January 2018 still qualify for more advantageous rules in this respect.
In the long term, the legislators want to see as many zero-emission cars on our roads as possible, which is why the tax deductibility of costs for non-zero emission cars is being phased out.
The same rules apply to the deduction of actual work-related expenses for income tax purposes based on the flat rate of EUR 0.15 per kilometre (commuting).
Costs of zero-emission cars purchased up to and including 2026 remain fully deductible. For cars purchased in 2027, a deduction percentage of 95% applies, and this decreases further to 67.5% for cars purchased in 2031. Unlike with non-zero emission cars, the applicable percentage here depends on the year of purchase and remains the same throughout the vehicle’s entire useful life.
Hybrid cars are considered to be non-zero emission cars. If they were purchased, leased or rented on or after 1 January 2023, they are subject to the normal rules; however, for plug-in hybrid cars, whose battery can be charged from an external power source, a maximum of 50% of petrol and diesel costs is deductible.
That is the current rule at any rate. The recent coalition agreement – despite beginning by announcing a simplification of the deduction restrictions for car costs – introduces a separate, albeit more advantageous, regime for hybrid cars:
Both the existing and the newly announced rules mean that the fuel costs of rechargeable hybrids must usually be subject to a different percentage from the lease costs, for example.
When an employer offers a flat-rate kilometre allowance for work-related travel with a plug-in hybrid purchased between 1 January 2023 and 31 December 2025, it is assumed that 30% of the allowance relates to petrol or diesel costs and 70% to other costs, including electricity.
Flat-rate kilometre allowance × 30% = 50% deductible (petrol or diesel consumption)
Flat-rate kilometre allowance × 70% = deductible according to car’s carbon emissions, fuel type and purchase date
When determining the disallowed expenses in the employer’s corporate tax return, both the employees’ taxed benefits in kind and the personal contributions made by them may be deducted from the non-deductible car costs.
Here too, the 70/30 rule is often applied: 30% of the benefit in kind or contribution is allocated to fuel and 70% to other car costs. However, it is also permitted to divide these costs based on the actual proportions.
If a company entered into a lease or rental agreement for a vehicle before 1 July 2023 and exercises the purchase option in the contract after 30 June 2023, the original deduction system remains applicable. Exercising the purchase option is not regarded as a new purchase.
However, if a company car and the associated lease contract are transferred to another company, for example within the same group, and an addendum is drawn up to identify the new contracting party, the date of that addendum determines the applicable tax system.
An adjustment to the terms of the lease or rental contract can also lead to it being treated as a new contract with a new contract date.
The new government ultimately plans to scrap the benefits for new vans that run on fossil fuels. We assume that the coalition agreement is referring in this context to the full tax deductibility of vehicles that meet the fiscal definition of ‘light truck’. And as you would expect in Belgium, this will be offset by a new measure, namely a temporary increased cost deduction for electric vans and trucks. It is not yet known how this will interact with the recently adjusted investment deduction, and which of the two will be more attractive from a tax viewpoint.
The ability to charge electric and plug-in hybrid cars at home instead of at a fuel station with a fuel card requires creative solutions in terms of not just technology but taxation too.
One situation that has long given rise to questions and problems is where an employee charges his or her car at home and the employer reimburses the electricity costs.
The benefit in kind for the private use of a company car in principle includes both the use of the car and the fuel costs, usually made available in the form of a fuel card. So is the electricity for which a reimbursement is paid also included in this flat-rate benefit? Yes, but under certain conditions, i.e. when there is a qualifying communication system that passes on consumption data to the employer.
How do we determine the amount to be reimbursed in such a situation? For a long time, the Minister of Finance took the position that this had to be the actual cost of the electricity consumed, which in practice is virtually impossible to calculate. Fortunately, a change of heart occurred (provisionally at least) in September 2024 and the Minister agreed that the reimbursement should be based on a specific CREG rate.
The details of this have since been set out in a circular. For the first quarter of 2025, the maximum fixed rate per kWh is: Flemish Region: 28.22 cents/kWh, Brussels-Capital Region: 32.94 cents/kWh and Walloon Region: 32.56 cents/kWh. However, note that this waiver of the usual rules is currently time-limited, running until 31 December 2025.
The reference carbon emissions have again fallen compared to last year: for 2025 they are 71 g/km for petrol, LPG or natural gas engines and 59 g/km for diesel engines. When the reference emissions fall, the benefit in kind for these vehicles increases.
An allowance for work-related trips made by an employee with his or her own vehicle is treated as a tax-free reimbursement of a cost specific to the employer if it is no higher than the allowance granted by the Belgian State to its civil servants. An annual and a quarterly allowance are published. These are EUR 0.4290 per kilometre for the first quarter of 2025 and EUR 0.4415 for the period from 1 July 2024 to 30 June 2025. Employers must opt for one system for the entire period.
Electric cars are currently exempt from road tax and vehicle registration tax. The Flemish Government had decided to put an end to this, but has now put this plan on hold. It is not clear when it will be picked up again.
[1] The date of purchase is the date of the signed purchase order or of the signed lease or rental contract.
[2] Deductibility percentage = 120% - (0.5% x coefficient x number of grams of CO2 per kilometre). The coefficient used is 1 for diesel cars, 0.90 for cars with a natural gas engine and a power rating for tax purposes of less than 12 hp and 0.95 for all other cars.
