Commercial vehicles in 2024: everyone electric?

Since 01/07/2023, the taxation of the Belgian company car has changed radically. The federal government is hereby fully committed to the greening of the Belgian car fleet. Is the electrification of your fleet really the only option or are fuel cars still worth considering? 

1 The current tax game rules for company cars

Before going into the tax rules for company cars, it is important to state what is meant by company cars. The term "company cars" includes passenger cars, dual use cars and minibuses.  

For fuel cars, a commercial vehicle's deduction percentage is determined using the formula below where the CO2-emissions and the engine type of the car has the greatest impact on the outcome of the formula: 

120% - (0.5% x fuel coefficient* x number of grams of CO₂/km) 

*Fuel coefficient: 

• Diesel: 1.00 
• Gasoline / gasoline hybrid / diesel hybrid: 0.95 
• Natural gas: 0.90 

The higher the car's emissions, the lower the tax deduction percentage.  

However, the deduction percentage can never be lower than 40% and never higher than 100%. 

The bulk of gasoline and diesel cars today have a tax deduction rate between 50% and 65%. The costs associated with electric cars are fully deductible for the simple reason that these cars have no emissions and thus the formula results in a deductible of 100%. 

Hybrid cars that combine a fuel engine with an electric motor are also almost always 100% deductible. However, this only applies to hybrid cars that have a battery with an energy capacity of at least 0.5 kWh per 100 kilograms of car weight and no more than 50 grams of CO2emissions per kilometer. 

Gasoline & diesel cars in 2024

For cars equipped only with an internal combustion engine and ordered in 2024, the tax deduction percentage obtained by the aforementioned formula is systematically reduced to zero during the car's useful life. This reduction in tax deductibility takes effect from tax year 2026 (fiscal year starting on 01/01/2025 at the earliest). 

The maximum deduction rate for these cars is phased out as follows: 

• AJ 2026: 75%; 
• AJ 2027: 50%; 
• AJ 2028: 25%; 
• AJ 2029: 0%. 

Hybrid cars in 2024

The deductibility of hybrid cars ordered in 2024 also faces an extinction scenario. Thus, the tax deduction of a maximum 100% (50% on fossil fuels) will apply only for tax year 2025. From tax year 2026 onwards, the deduction percentage will then gradually decrease year by year, to finally extinguish completely in tax year 2029 (fiscal year from 01/01/2028 and later). 

• AJ 2026: 75%; 
• AJ 2027: 50%; 
• AJ 2028: 25%; 
• AJ 2029: 0%. 

Electric cars in 2024

Electric cars ordered in 2024 will retain their 100% deductibility throughout their useful life. Starting in 2027, the deduction percentage will be phased out year by year; here, however, the car's deduction percentage will be locked in the year of purchase. Thus, for electric cars, there is no extinction of the deduction percentage throughout the car's useful life. 

Thus, electric cars purchased between 01/01/2027 and 31/12/2027 will be subject to the deduction rate of 95% throughout their useful life. The tax deductibility will be phased out year by year to eventually arrive at a fixed deduction rate of 67.5% as of Jan. 1, 2031. 

The phase-out of the deduction rate is as follows: 

2 What if your employees still prefer a fuel car?

The extinction of the tax deductibility of traditional fuel cars is forcing companies to make the transition to an all-electric fleet. As illustrated in the example below, the more tax-advantaged regime for electric cars has a huge impact on the overall cost to the company.  

Example 1: Employee is awarded a mid-size SUV. 

List prices, lease fees, and fuel prices are expressed including 65% non-deductible VAT.

In most cases, the fiscal and parafiscal impact (in the form of the CO2 contribution) is so great that it more than offsets the higher purchase/or lease price of an electric car.

In addition, electrified cars (fully electric or hybrid) always enjoy a lower benefit all nature than traditional gasoline and diesel cars of the same type, resulting in a lower valuation on behalf of the employee.

However, there is a lot involved in electrifying a fleet of vehicles (more on this in a subsequent article later this month). Therefore, in certain situations, it is not yet possible to switch to an electric vehicle at this time.

If your employees still prefer a gasoline, diesel or hybrid car due to practical concerns or personal preference, this can be made possible by assigning a TCO budget to each employee or job profile.

Example 2: Employee receives a TCO-budget of EUR 975 per month granted.

List prices, lease fees, and fuel prices are expressed including 65% non-deductible VAT.

The Total Cost of Ownership (TCO) of a car comprises the total cost of the car, including all costs that the use of the car entails. This takes into account the cost of purchasing and financing the car, insurance, maintenance and fuel costs, as well as the tax & parafiscal impact of the car.

By assigning the employee a TCO budget, the employee has the free choice to opt for a gasoline, diesel or hybrid car with a lower purchase/lease price, which is fiscally less advantageous, or to opt for an electric car with a higher purchase/lease price that enjoys more favorable tax treatment. Thus, based on the TCO approach, the employee has a free choice between a fiscally advantageous or disadvantageous car, while the employer is certain of the cost of the car without any tax surprises. This approach allows the employer to meet the mobility needs of each employee.

Curious about the TCO of your current cars, or do you have questions regarding the electrification of your fleet?

Do not hesitate to contact us here contact us with questions.

Unsure of the right approach for your business?  Then make an appointment here with our pro experts!