Car taxation and compliance: an uphill ride

Tax is becoming ever more complex. The compliance burden continues to increase. Car taxation is no exception to this trend.

For some years now, the benefit in kind related to a company car must be calculated using a formula which incorporates the catalogue value, CO2-emission, fuel type and age of each individual car separately.

A part of this benefit in kind (17 or 40%, depending on whether the company bears private fuel expenses or not), must be added to the company’s disallowed expenses.

As from 2020, the deduction percentage for all car expenses, including fuel, must be determined for each individual car separately according to a formula which takes its CO2-emission and its fuel type into account.

Example: expenses of a diesel car emitting 120 g of CO2/km are 60% deductible, for a similar car running on petrol the percentage equals 63%.

Also as of 2020, specific rules will enter into force with respect to so-called ‘fake’ hybrids. The percentage of deduction for expenses of plug-in hybrids must be determined taking into account the emission of CO2 of a corresponding vehicle running exclusively on fossil fuel, if the energy capacity of the battery <0,5 kWh per 100kg weight of the car or the emission of CO2 of the car is >50 g/km. If there is no corresponding vehicle, the emission of CO2 is multiplied by 2,5. The regime for ‘fake’ hybrids only applies for vehicles purchased, leased or rented as from 1 January 2018.

All these calculations require an extensive administration, especially for companies with large car fleets. We can assist you in meeting your compliance requirements. Do not hesitate to contact us in this respect.