Stricter rules regarding vehicle taxation under income tax on legal entities
Stricter rules regarding vehicle taxation under income tax on legal entities
Following earlier tightening measures in personal and corporate income tax, new rules regarding car taxation have been introduced within the income tax on legal entities. This new regulation applies from assessment year 2027 (for taxable periods starting as from January 1, 2026).
Both residents and non-residents subject to Belgian income tax on legal entities fall under this stricter framework. However, its application is limited only to entities of the second and third category, as defined in Article 220, 2° and 3° of the Belgian Income Tax Code (ITC92). These mainly include non-profit organizations and entities that, pursuant to Article 180 ITC92, are not subject to corporate income tax (for example, certain intermunicipal entities).
Company cars (or equivalent vehicles)* that were purchased, leased, or rented before January 1, 2026, remain subject to the old tax regime.
Both residents and non-residents subject to Belgian income tax on legal entities fall under this stricter framework. However, its application is limited only to entities of the second and third category, as defined in Article 220, 2° and 3° of the Belgian Income Tax Code (ITC92). These mainly include non-profit organizations and entities that, pursuant to Article 180 ITC92, are not subject to corporate income tax (for example, certain intermunicipal entities).
Company cars (or equivalent vehicles)* that were purchased, leased, or rented before January 1, 2026, remain subject to the old tax regime.
“Old rules” (applicable to vehicles* purchased / leased / rented before 1/1/2026)
Entities subject to income tax on legal entities were not taxed on their car expenses. Only when a vehicle was made available to an employee or director for private use, a tax was due on (17% or 40% of) the benefit in kind.
“New rules” (applicable to vehicles* purchased / leased / rented as from 1/1/2026)
While the benefit in kind remains taxable as before, a significant change is introduced:
- For non-zero-emission vehicles (incl. hybrid cars) purchased, leased, or rented from 2026 onwards, all vehicle expenses will become taxable.
- For zero-emission vehicles the costs remain fully deductible if the vehicle is acquired no later than December 31, 2026. After that, a gradual reduction in deductibility will be introduced, depending on the year of acquisition.
Please find below a summary overview of the deductibility rates:
The deductibility percentage, as shown in the table above, will apply throughout the entire life of the vehicle.
To prevent double taxation, vehicle expenses are only taken into account to the extent that they exceed the taxable benefit in kind (where applicable) and the personal contribution paid by the beneficiary.
Car expenses reimbursed for business travel using a personal vehicle do not need to be included in the taxable base.
The applicable tax rate is 25%, just as it is for the benefit in kind.
Action?
If your entity is considering purchasing, leasing, or renting new vehicles, we recommend to take these new tax regulations into account.
If you would like further clarification or wish to calculate the specific impact on your organization, please do not hesitate to contact us.
*
- Passenger cars (other than those used exclusively for paid passenger transport);
- Dual-purpose vehicles;
- Minibuses;
- Light trucks classified as passenger cars.