New tax law on the greening of mobility

Introduction: Belgian government’s green ambitions

At the start of the De Croo I government, the ambition was expressed that all new company cars should be zero-emission cars by 2026. With the recent draft of law on the tax and social greening of mobility, this ambition has been put into practice.

In general, the reform consists of three major elements. First of all, the tax treatment of company cars will evolve and as of 2026, costs related to company cars will only be eligible for tax deductions in case of a zero-emission company car. Next to that the solidarity contribution will also undergo changes in order to stimulate the usage of zero-emission cars. Further, tax incentives will be foreseen to deploy electrical charging infrastructure in Belgium.

1) Decrease and abolition of tax deductions for carbon emission company cars

In order to motivate employers to make the switch towards zero-emission company cars, the new law foresees to abolish the tax deduction of car costs of carbon emission company cars.

The current deductibility of company cars is linked to the CO₂ emission of the related car conform a specific formula. As a general rule, the higher the CO₂ emission the lower the deduction of the professional expenses and therefore the higher the corporate taxes will be.

Diesel engines: 120% - (0,5% x 1 x CO_²- emission/km (in gr))
Natural gas engines: 120% - (0,5% x 0,90 x CO_²- emission/km (in gr))
Other vehicles: 120% - (0,5% x 0,95 x CO_²- emission/km (in gr))

Even if the outcome of the formula designates a higher deduction rate, the maximum deduction rate is 100% as from January 1st, 2021. Furthermore, some minimum deduction rates apply depending on the age of the car:

• Cars purchased, leased or rented before July 1st 2023 with a CO₂- emission lower than 200 gr/km: minimum 50%;
  
• Cars purchased, leased or rented before July 1st 2023 with a CO₂- emission higher than 200 gr/km: minimum 40%;
  
• Cars purchased, leased or rented before January 1st 2018: minimum 75%;
  
  

Deduction of professional expenses of carbon emission company cars (non-hybrid)

Cars before July 1st 2023

The new law does not impact current purchases, rents or leasing contracts. According to the ‘grandfathering’ rule, company cars purchased, rented or leased before July 1st 2023, are not affected by the new law. For these cars, the tax treatment as it exists today will not change.

Cars between July 1st 2023 and January 1st 2026

For company cars purchased, leased or rented between July 1st 2023 and December 31st 2025, the new law foresees in a transitional regime (‘phasing out principle’). This implies that for these cars the current rules remain applicable and that the tax deduction rate is still calculated depending on the CO₂ emission of the company car. As a result, the above mentioned formula(s) remains applicable. However a few additional rules apply:

• The minimum deduction rates of 50% and 40% do not apply for company cars purchased, leased or rented between July 1st 2023 and December 31st 2025
  
• The deduction rate is capped at a maximum of 75%, even if the formula would designate a higher deduction rate, unless the company car is zero-emitting (for zero-emitting company cars the tax deduction rate is 100%).
  

Furthermore, the maximum tax deduction rate for carbon emission company cars that were purchased, leased or rented between July 1st 2023 and December 31st 2025 (transitional period) will also further decrease year by year:

• As of tax year 2026: 75%
  
• As of tax year 2027: 50%
  
• As of tax year 2028: 25%
  
• As of tax year 2029: 0%

Cars as of January 1st 2026

Carbon emission company cars purchased, rented or leased as from January 1st 2026 will no longer be deductible. As of this date, the purchase, rent or lease of new company cars can thus only result in a tax deduction if they are zero-emitting.

Deduction of professional expenses rechargeable hybrid cars

Firstly, the deduction of professional expenses for diesel and gasoline costs of rechargeable hybrid cars will be limited to maximum 50% for carbon emission company cars purchased as of January 1st 2023. The other costs related to the hybrid company car will be deductible in the same way as carbon emission company cars. Via this exception, the government wants to encourage drivers of hybrid cars to use the electrical motor.

As of January 1st 2026, this measure will lapse, as from then on the tax deductibility of all professional costs (costs of the car, fuel and the electricity costs) relating to the use of hybrid company cars with CO2 emissions will not be deductible anymore.

Deduction of professional expenses zero-emission cars

In order to further stimulate the shift to company cars with zero carbon emission, the deductibility of zero-emission cars will remain unchanged till December 31st 2026. This means that these kind of cars are deductible for 100%. As of January. 1st 2027, the tax deduction rate for zero-emission company cars will decrease on a yearly basis:

• Cars purchased, leased or rented as from January 1st 2027: 95%
• Cars purchased, leased or rented as from January 1st 2028: 90%
• Cars purchased, leased or rented as from January 1st 2029: 82,5%
• Cars purchased, leased or rented as from January 1st 2030: 75%
• Cars purchased, leased or rented as from January 1st 2031: 67,5%
  
  

Benefit in kind company car remains unchanged

From an employee perspective, the new law will not have any impact. The current rules to determine the taxable benefit in kind for the private use of a company car remain unchanged. However, the fact that employers are encouraged to make the switch towards zero-emission company cars could possibly result in a lower benefit in kind for the employees. This is the case since the benefit in kind for the private use of a company car is calculated based on the CO2 emission of the car. If an employee switches from a carbon emission company car towards a zero-emission electric car, this could result in a decrease of the benefit in kind. 

2) Increased employer solidarity contribution

Solidarity contribution under the current legislation

Employers who provide their employees with a company car have to pay a solidarity social security contribution. This is a monthly lump sum contribution that is calculated depending on the CO2-emission and the fuel type of the company car. Currently, the yearly contribution is calculated as follows:

• Petrol cars: (CO_² emission (g/km) * 9 EUR) – 768
• Diesel cars: (CO_² emission (g/km) * 9 EUR) – 600
• LPG cars: (CO_² emission (g/km) * 9 EUR) – 990

The minimum contribution, regardless of the outcome of the formula, is 249,96 EUR per year (20,83 EUR per month). As a result, this is the current solidarity contribution amount for employers who grant their employees an electric car.

Solidarity contribution under the future legislation

In order to discourage employers to grant their employees a carbon emission company car, the solidarity contribution will increase significantly. The increase will only be applicable for company cars that were purchased, leased or rented as from July 1st 2023. Company cars purchased, leased or rented before this date, will not be affected by the new legislation. The increase of the contribution will be implemented by multiplying the amount of the contribution that is the result of the above-mentioned formulas by a yearly increasing factor:

• As of July 1st 2023: *2,25
• As of January 1st 2025: *2,75
• As of January 1st 2026: *4
• As of January 1st 2027: *5,50

Furthermore, the minimum contribution will increase as of January 1st 2025 as follows:

• As of January 1st 2025: 23,41 EUR/month (280,92 EUR/year)
• As of January 1st 2026: 25,99 EUR/month (311,88 EUR/year)
• As of January 1st 2027: 28,57 EUR/month (342,84 EUR/year)
• As of January 1st 2027: 31,15 EUR/month (373,80 EUR/year)

Even though the increased minimum contribution will not be applicable to company cars rented, purchased or leased before July 1st 2023, this increase will also affect employers who grant their employees zero-emissive company cars.

3) Tax incentives for electrical charging infrastructure

As the Belgian government has decided to entirely electrify the Belgian company car fleet, this will lead to an extensive increase in the need for infrastructure to charge electric cars. As a result, the new law also foresees in two tax incentives to encourage companies and individuals to install charging stations.

Increased cost deduction for the installation of publicly accessible charging stations

In order to encourage companies to invest in charging infrastructure for electrical cars, the Belgian government announces an increased cost deduction for the depreciations of newly installed publicly accessible charging stations.

The increased cost deduction will be applicable on eligible investments made from September 1st 2021 until August 31st 2024. As the Belgian government wants to encourage short-term investments, the deduction rate will decrease overtime. The following rates apply:

• Eligible investments made between September 1st 2021 and December 31st 2022: 200%
• Eligible investments made between January 1st 2023 and August 31st 2024: 150%
• As of September 1st 2024: 100%

In order to benefit from the increased cost deduction, the charging station should be publicly accessible, which implies that the charging infrastructure should at least be accessible to third parties (during either the normal opening hours or during the normal closing hours of the company) and public, in the sense that users can verify both the location and availability of the charging station. Furthermore, companies have the obligation to report the available charging stations to the FPS Finance so that the available charging stations can be mapped.

Another condition to benefit from the increased cost deduction lies in the fact that the installed charging station should be an intelligent charging station. This means that the charging time and charging capacity can be linked with an energy management system (however only necessary/applicable as from income year 2023). Investments in non-intelligent charging stations are thus not eligible for the increased cost deduction.

Tax reduction for the installation of a home charging station

In principle, electric cars can be charged through a charging cable via a standard electrical outlet. However, studies have shown that this charging method entails serious risks of fire safety and overloading of the electricity grid. In order to reduce these risks, the Belgian government wants to encourage individuals to invest in a home charging station. In addition, a home charging station does not only reduce the risks, the charging speed is also up till 10 times higher compared to charging via a standard electrical outlet.

As a result, the new law foresees a tax reduction for investments made by individuals in a home charging station. In this way the Belgian government aims to encourage people to charge their electric car at home by reducing the total cost of the installation of a home charging station.

The tax reduction shall be granted for expenses paid by a taxpayer for the purchase and placement of a charging station at the address where he or she has established his/her place of residence on January 1st of the tax year in which the tax reduction is claimed. As a result, it is not necessary that taxpayers are already residing in the property where the home charging station is being installed at the moment of the installation or the payment of the home charging station. Furthermore the tax reduction can not only be claimed by the owner of an immovable property, also tenants who invest in a home charging station can enjoy the tax reduction.

Similar to the above described increased cost deduction for the installation of publicly accessible charging stations, the tax reduction is only applicable for investments in intelligent charging stations. However, the new law imposes an additional condition to benefit from the tax reduction: the home charging station may only use renewable energy. Furthermore, taxpayers who want to claim the tax reduction have the obligation to have the home charging station installed by a professional. Home charging stations installed by the taxpayer himself, are not eligible for the tax reduction.

The following expenses are eligible for the tax reduction:

• The purchase price and installation cost of the home charging station;
• Expenses to increase the electricity installation from one to three phases;
• Expenses for the mandatory inspection of the installation;

The tax reduction can be claimed on a maximum amount of 1500 EUR per home charging installation and per taxpayer. The tax reduction is limited to expenses made between September 1st 2021 and August 31st 2024. A taxpayer can only benefit one time from the tax reduction. If a taxpayer made expenses during two different calendar years, he can only claim the tax reduction for the costs incurred in one of these two years.

The applicable tax reduction rate will decrease in time:

• Eligible expenses made between September 1st 2021 and December 31st 2022: 45%;
• Eligible expenses made between January 1st 2023 and December 31st 2023: 30%;
• Eligible expenses made between January 1st 2024 and August 31st 2024: 15%. 
  
  

Conclusion

The new draft of tax law on the greening of mobility clearly shows the Belgian government’s ambition to electrify the Belgian company car fleet. As a result of the reform of the company car tax rules, Belgian employers will in the future be forced to grant their employees a zero-emission company car if they want to be able to benefit from a tax deduction. The electrification of the Belgian company car fleet will result in a significant increased need of charging infrastructure. Through the tax reduction for the installation of a home charging station and the increased cost deduction for the installation of publicly accessible charging stations, both individuals and companies will be encouraged to invest in charging infrastructure.

We believe that the change in the law triggers the momentum to rethink your mobility strategy. Not only the list of the company cars, but also mobility in a broader perspective with all the different aspects (alternatives, sustainable changes, employee experience, teleworking …). If you have questions about this or if you are interested in a co-creation track where we help you in the transformation of your mobility, do not hesitate to contact us.