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17 December 2020 / news

Company cars: reference CO2 emission can no longer increase

Recently approved by the Committee for Finance, a draft bill was passed by the Belgian Parliament concerning the reference CO2 emission, one of the parameters for calculating the benefit in kind relating to the private use of a company car (hereinafter, "BIK car").

Company cars: reference CO2 emission can no longer increase

The draft bill aims to apply the 2021 reference CO2 emission for determining the 2021 BIK car in case it would be lower than the 2020 reference CO2 emission, but maintains the 2020 reference CO2 emission in case the 2021 reference CO2 emission would be higher. According to the authors of the draft bill, this should help fighting the “harmful effects of the BIK car on mobility and the environment”.

BIK Car & reference CO2 emission

The BIK car is determined based on the following formula:

catalogue value × [5.5 + ((CO2 emission rate - reference emission-CO2) x 0,1)] × 6/7 x a  reduction between 6% and 30% depending on the period that has passed since the date of first registration of the car

Since 2012, the reference CO2 emission is determined each year by Royal Decree based on the CO2 emission of vehicles (i.e. other than those used exclusively for remunerated transport of persons) which are newly registered.

Overview of reference CO2 emissions per calendar year

Calendar year

Motor vehicles powered by gasoline, LPG or natural gas

Motor vehicles powered by diesel fuel

2012

115 g/km

95 g/km

2013

116 g/km

95 g/km

2014

112 g/km

93 g/km

2015

110 g/km

91 g/km

2016

107 g/km

89 g/km

2017

105 g/km

87 g/km

2018

105 g/km

86 g/km

2019

107 g/km

88 g/km

2020

111 g/km

91 g/km

For income year 2020, the base CO2 coefficient is 5,5% for cars whose CO2 emission does not exceed the 2020 reference CO2 emission (see above).

When the cars’ CO2 emission exceeds the reference CO2 emission, the base CO2 coefficient (i.e. 5,5%) is further increased up to a maximum of 18%. The excess is determined as the difference between the car’s CO2 emission and the reference CO2 times 0,1.

Effect of this draft bill - hypothetical examples

An increase of the reference CO2 emission for the second consecutive year would result in an unfavorable environmental trend and an unjustified decrease of the BIK car, whereas the legislator had originally assumed that the reference CO2 emission would decrease each year considering the efforts expected from car manufacturers.  

An example illustrates the above (comparison based on the 2018 versus 2019 reference CO2 emission):

Suppose a diesel car with

  • catalogue value of 50K EUR;
  • C02 emission: 136 g/km;
  • reference CO2 emission of 93 g/km for 2021.

 

 

 

 

2019

2020

2021

 

reference CO2 emission

   

88

91

93

 

CO2 emission percentage

   

10,30%

10%

9,80%

 

time reduction (rebate)

01-01-2018

 

100%

94%

88%

 

BIK car (/ year)

   

4.414,29

4.028,57

3.696,00

 

The decrease of the BIK car seems relatively significant (+- 700 EUR in 2 years’ time).

However, this decrease is also influenced by the reduction related to the period that has passed since the first registration of the car (between 6% and 30%) which has a more significant impact than just freezing the reference CO2 emission. The below table shows the tax impact when the freezing of the reference CO2 emission is isolated (hence neutralizing the reduction related to the period that has passed since the first registration of the car):

 

 

 

2019

2020

2021

 

reference CO2 emission

   

88

91

93

 

CO2 emission percentage

   

10,30%

10%

9,80%

 

first registration (rebate)

01-01-2018

 

100%

100%

100%

 

BIK car (/ year)

   

4.414,29

4.285,71

4.200,00

 

As you will notice, the decrease in BIK car is far less impressive, barely 200 EUR in 2 years’ time.

So, freezing the reference CO2 emission and keeping the reduction related to the period that has passed since the first registration of the car, the table would look like as follows:

 

 

 

2019

2020

2021

 

reference CO2 emission

   

88

91

91

 

CO2 emission percentage

   

10,30%

10%

10%

 

first registration (rebate)

01-01-2018

 

100%

94%

88%

 

BIK car (/ year)

   

4.414,29

4.028,57

3.771,43

 

Compared with the first table above, the 2021 BIK car will be impacted for only 75 EUR (i.e. 3.696,00 EUR versus 3.771 EUR). Considering a marginal tax rate of 50%, the tax impact for the employee would amount to 37,50 EUR (/ year) or 3,13 EUR per month.

The reference CO2 emission also impacts the disallowed expense on behalf of the employer (i.e. 17% or 40% on the BIK car depending on whether fuel costs are at charge of the employer). Due to this draft Bill, the disallowed expense shall also slightly increase given the slight increase in the BIK car due to a standstill in the reference CO2 emission (table 1 versus table 3).    

Given the expected, rather insignificant tax impact, one can question whether this approved modification will be a determining influence in helping environment and mobility.

Reference CO2 emission for 2021

The Belgian tax authorities published on December 15, 2020 (on their website), the reference CO2 emission for the year 2021:

  • Motor vehicles powered by gasoline, LPG or natural gas: 102 g/km
  • Motor vehicles powered by diesel fuel: 84 g/km

Tax authorities also announced that a Royal Decree will soon be published in this respect.

Going forward to the above, the reference CO2 emission for the year 2021 will therefore, in any case, be used for the determination of the 2021 BIK car since it is lower than the reference CO2 emission of 2020 (i.e. respectively 111 g/km and 91 g/km).



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