In the past year, a lot has been discussed around changes in taxation for company cars. Meanwhile, the bill has been confirmed and voted on, and we know the evolution of taxation for the coming years. But apart from this tax reform, there are also evolutions within the existing tax system that are sometimes overlooked. What changes fly just under the radar that also have a major impact ?

THE RECENT TAX REFORM

Meanwhile, the upcoming changes in tax deductibility are well known. Indeed, deductibility will follow the schedule in Minister Van Peteghem’s approved bill in the coming years. As a reminder, these are the key milestones for new CO2-emitting commercial vehicles:

• Until 31/05/2023, all ordered cars (read: signed order forms or contracts) are still under the current tax regime. The fuel consumption of plug-in hybrids (PHEV) does already fall to 50% as of 01/01/2023.
• All cars ordered from 01/07/2023 to 31/12/2025 are subject to a phasing-out program whereby the tax deductibility evolves degressively to 0% by 2028
• All company cars ordered as of 01/01/2026 lose their tax benefit. The tax deductibility for all costs related to the car is thus 0%.

Zero-emission commercial vehicles ordered through 2026 retain the 100% tax deductibility that also applies today.

In real cost change, an example for a diesel car with a CO₂ emissions of 110g/ km gives a net cost increase of 16.25 EUR per 100 EUR lease amount (or depreciation). Indeed, with 65% tax deductibility and 25% corporate income tax, the net cost of a 100 EUR lease amount is 83.75 EUR. With 0% tax deductibility, the benefit is eliminated and the gross lease amount is thus equal to the net cost, i.e., 100 EUR. For a company car with a lease amount of EUR 500, this therefore quickly means a net cost increase of EUR 81.25, or 19.40%.

While this already represents a substantial cost increase, there is another change with an even greater impact that was also included in the new law but is less mentioned by the various media: the CO₂– or solidarity contribution.

THE CO₂ OR SOLIDARITY CONTRIBUTION.

A CO₂ contribution, even if they are zero-emission company cars. In that situation, although it is the minimum amount (in 2022 it is 28.17 EUR per month). For the previously mentioned diesel car with 110g/km, this contribution comes to 43.96 EUR per month.

These contributions are indexed annually but the monthly cost increase is generally limited to a few eurocents or a maximum of about three euros. The (parafiscal) modification of the solidarity contribution that was included in the law but was somewhat snowed under by the evolution of tax deductibility is as follows:

• Factor 2.25 as of July 1, 2023
• Factor 2.75 as of Jan. 1, 2025
• Factor 4.00 as of Jan. 1, 2026
• Factor 5.50 as of Jan. 1, 2027

So, concretely, by 01/01/2027 for our previous diesel you will pay a solidarity contribution 5.5x higher than the current one. In our example, this implies a contribution of 241.76 EUR. Compared to the current 43.96 EUR, this is thus an additional cost of no less than 197.80 EUR, per month. More than double the cost increase due to tax deductibility.

So while the change in tax deductibility is an important factor, the CO₂ contribution is all the more the factor that has an impact. In addition, this CO₂ contribution always applies to company cars, even when no profit is made by the company.

VAA

Although no changes in terms of the Benefit in Kind (SG&A) were included in the law as voted on, a significant cost increase is on the way for all cars with a CO₂ emissions. The VAA for company cars is calculated as follows:

“Catalog value x age quotient x (5.5 + (0.1 x (_{CO2 emissions}– reference emissions))) x 6/7″

In this formula, the reference value is a very important parameter. Indeed, it is linked to the average emissions of the currently sold fleet. Now, because since 2020, manufacturers must comply with a CO₂ target of 95g/km, they want to sell as many environmentally friendly cars as possible. Consequence: the average CO2 emissions of the fleet sold in Belgium are noticeably decreasing.

Obviously, this is a good thing for the climate and our health. For those who want to choose a diesel/gasoline, have just chosen or for those who are still driving a diesel/gasoline today, this means a substantially higher SG&A. Let’s take the figures and reference values of the last 3 years. For a diesel, this reference value evolved from 88 grams in 2019, to 91 in 2020, to 84 in 2021. In 2022, this will drop further to 75. Because in the new law, the formula for determining the SG&A is not touched by the legislator, the cost evolution for our diesel looks at 110gCO₂/km and a tax value of EUR 40,000 looks as follows:

• EUR 220.00 gross SG&A per month in 2019
• EUR 211.43 gross SG&A per month in 2020 (or -3.89% vs. 2019)
• EUR 231.43 gross SG&A per month in 2021 (or +9.46% vs. 2020)
• EUR 257.14 gross SG&A per month in 2022 (or +11.11% vs. 2021)

As the CO₂ emissions from the average fleet sold continue to decrease, the SG&A for CO₂ producing cars will continue to increase. If we assume that a linear decrease in the baseline would continue, our example car would see an increase of EUR 25 per month over the next few years. This corresponds to an increase of 10% per year. And secretly we know that the linear assumption itself is an underestimate. Over the next few years, the increase will potentially rise to 15% each year. The impact becomes especially clear when the cost increase is considered over the entire lease period of the company car. it would be 1,200€ at 48months.

However, the SG&A calculation also takes into account the age of the car. This produces a net 6% decrease in SG&A per year. However, the strong change in the reference values only cause the SG&A to increase annually between 10 and 15%. So in practice, the decrease becomes an annual increase between 5 and 10% !

So those who continue to drive an internal combustion engine know what awaits them in terms of SG&A …