No tax increase on ICE company cars in Belgium

Belgium will not have a sharp increase in taxes on fossil company cars. After much wrangling, the federal government has agreed on the benefit in kind for diesel and gasoline company cars.

The government reached a deal by linking other dossiers to that of company cars. Thus, the annual ceiling of the bicycle allowance will also increase, and inflation for train season tickets, 56% of which are reimbursed by employers, will not be passed on.

‘Artificial tax increase’

Anyone who uses their company car privately also pays taxes on the ‘benefit in kind,’ which is recalculated every year. The amount depends on the car’s CO2 emissions, which is where the problem arose.

With the electrification of the car fleet, employees with a diesel or gasoline company car risked having to pay up to 20%, or some 300 to 500 euros, more than in 2023 because the average CO2 emissions of newly registered vehicles – often EVs – have fallen sharply.

However, according to Finance Minister Vincent Van Peteghem (CD&V), not every employee, for various reasons, has yet the chance to choose an EV. “Then it makes sense not to confront them with an artificial tax increase,” he said.

Consequently, Van Peteghem worked out a solution to mitigate the increase. Until now, when determining the reference CO2 emissions, EVs weighed 44% in the calculation method, while they represent only 17% of the number of registrations. That is why Van Peteghem said it was necessary to modernize the system. This will also consider the more modern so-called WLTP value and zero emissions, which will apply to EVs.

But the core federal government cabinet had not agreed on it for weeks. As long as Van Peteghem had not filed a new royal decree with CO2 reference values for calculating the benefit in kind, the rates remained the same as last year.

Higher bicycle allowance and higher intervention train pass

However, linking the dossier to four other measures, the federal government agreed on Monday evening that after two weeks of negotiations, there would be no increase in the cost price for combustion-engine company cars.

For example, the annual ceiling of the bicycle allowance will be raised. For those who cycle long distances to work, the yearly tax-free ceiling of the bicycle allowance is now 2,500 euros. This will be increased to 3,500 euros. “People traveling longer distances by bicycle are thus further incentivized,” said Van Peteghem. The measure should have a maximum budgetary impact of 500,000 euros.

Moreover, the inflation rate for train season tickets, which are reimbursed for 56% by employers – a third of all work season tickets – is also not passed on. In other words, employers will be encouraged to increase their share of staff season ticket costs not covered by a third-party payer scheme from 56 to 71.8%, with the government imposing 7.5%. That way, the employee would only contribute 20% of the cost, compared to 44% today. Accounting for about 100,000 employees, that measure may cost 3.6 million euros.

That green touch in the agreement came at the insistence of Green and Ecolo: the parties did not want owners of polluting company cars to receive a gift, while workers who opt for the train or bicycle would not be rewarded.

€3.6 million budgetary impact

Anyway, the elaborated agreement on the tax on fossil company cars – Finance estimates the budgetary impact at 3.6 million euros – is temporary. By 2026, all company cars in Belgium must be greenhouse-gas-free.

A car was part of the salary package for 14.6% of private-sector employees last year, compared to 14.8% in 2022. This means that company cars have declined in popularity for the first time in many years.

However, in the first quarter of 2022, the fleet consisted of 560,941 company cars made available to employees in Belgium, with half being more expensive than 40,000 euros. This number has steadily increased over the past 15 years and has even more than doubled.

Remains also the fact that CO2 emissions from combustion engine passenger cars have not decreased over the past 12 years, as the European Court of Auditors put in a recent report. While on paper, emissions from new cars fell on the street, hardly anything has changed.

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