Green mobility: we all face the (tax) challenge!

The end of 2021 marked the start of a profound reform of car taxation. The tax deductibility of fossil fuel cars had already been restricted since the 2017 Summer Agreement, but with this reform the government, in the short term, wants to go all out for greener mobility.

In Belgium, the company car has long been the number one salary component on a tax and social level. Previous government initiatives to encourage employees to consider alternative mobility remuneration (e.g., the cash-for-car scheme) could not win the approval of most companies.  As such it makes sense that the attractive deductibility of (polluting) company cars is now being restricted even further.

Details of the reform

The reform will take effect from 2023 with the following key turning points:

• 1 January 2023: fossil fuel costs of plug-in hybrid cars purchased, leased or rented from this moment on (whereby the date of order is decisive) will no longer follow the favourable tax deductibility of the hybrid car itself, but will only be deductible for 50%.

• 1 July 2023: car expenses for fossil fuel cars (including plug-in and full hybrids) purchased, leased or rented from this moment on (whereby the date of order is decisive) will be subject to a phased fading out of tax deductibility. This fading out will be as follows:
   

(*) The solidarity contribution will also change in stages with a drastic increase in the contribution from 225% as of 1/7/2023 to 550% as of 1/1/2027.

(**) Assessment year

In the meantime, electric cars can temporarily benefit from a favourable tax regime whereby all car costs, including electricity costs, are currently 100% deductible. Thus, companies have from a financial point of view every interest in getting their employees to switch to electric cars from 1 July 2023 onwards. However, from 1 January 2027, when it is assumed that the electric car has become the (new) standard, the deductibility of these car costs will also be restricted (as is currently the case for fuel cars). This restriction of deductibility will then also take place in phases:

Another part of the favourable tax regime for electric cars is the increased cost deduction for investments in publicly accessible charging stations. Under certain conditions, companies can apply a higher deduction for the fiscal depreciation of the charging stations. This increased deduction amounts to 200% for investments made between 1 September 2021 and 31 March 2023, and 150% for investments made between 1 April 2023 and 31 August 2024.

Total cost of ownership (TCO)

Because of this reform and the decreasing tax deductibility of costs related to fossil fuel cars, companies will see the total cost of ownership (TCO) of their fleet (which currently still mainly consist of fossil fuel cars) increase significantly in the short term. As a consequence, financially, companies will be forced to invest in electric cars.

Moreover, there is also a growing demand from (new) employees for alternative mobility solutions in their salary package (combination of public transport, a smaller and ecological car, teleworking, etc.). The mobility budget can already represent a worthy alternative for certain employees.

Many companies now face the challenge of introducing a green and alternative mobility policy in the short term, or at least of switching to one. This is certainly not only fiscally inspired. But this brings with it certain difficulties: how can companies calculate and map out the TCO, can the company car of an employee (which is part of the salary package) be changed unilaterally by the employer, how can this transformation process be deployed as efficiently as possible, how can employers deal with practical difficulties (such as where to install charging points, how to provide buildings with this charging infrastructure, etc.), how can companies communicate this as effectively as possible to their employees, which alternative mobility solution can companies offer to current employees in terms of employment law, etc. Such difficulties will make many people doubt its feasibility.

Our experts can help with these different issues. They can also develop a tailor-made strategy on green mobility if required. Do not hesitate to contact Stijn Rasschaert or Jonathan Collard or your local BDO-advisor.