Company cars: benefit in kind in 2021
When an employer provides a company car to an employee or director, the employee/director is taxed on the benefit in kind. The calculation of this benefit in kind depends amongst other on the CO2 emission of the vehicle compared to the 'average emission of the Belgian car fleet'. This average emission decreased in 2020, after two years of increase. Good news for the climate, but not so good for your wallet.
Benefit in kind
For the calculation of the benefit in kind related to a company car, the following formula is used:
list price x CO2 percentage x 6/7 x age percentage
The list price is the price which has to be paid for the vehicle, including VAT and all options, but not taking any discount into consideration. This list price does not change afterwards, but a certain decrease in value is taken into account based on the age of the vehicle. The first year the age percentage is 100%. For every year 6% is deducted, with a minimum of 70%.
The formula also contains the CO2 percentage (also CO2 coefficient).
How is this percentage calculated?
The standard percentage is 5,5%. But subsequently it has to be adjusted.
The first step in the 'adjustment' is the comparison with the CO2 emission of your vehicle with the average CO2 emission of the Belgian car fleet in the 12-month period before October of the year before the taxable period. For 2021 income, this is the average emission from October 2019 until September 2020.
This average emission is published annually (in the course of December). For income year 2021, the average emission amounts to:
102 g/km for vehicles running on petrol, LPG or natural gas; and
84 g/km for vehicles running on diesel.
This is a decrease compared to previous years.
In 2020, these average amounts were respectively 111 g/km and 91 g/km.
In 2019, these average amounts were respectively 107 g/km and 88 g/km.
The second step in the calculation of the CO2 percentage: transferring the difference between your car's emission and the average emission, in an 'adjustment' to the standard CO2 percentage of 5,5%. For each gram CO2 that your car is below or above the average, the percentage is decreased or increased with 0,1%. The percentage should be between 4% and 18%. When your diesel vehicle e.g. has a CO2 emission of 100, the CO2 percentage equals 5,5 + (0,1 * (100 - 84)). So 5,5 + 1,6: the CO2 percentage is 7,1%.
Minimum benefit in kind
After all the law also foresees that the benefit in kind cannot be lower than 1.370 euro (for income year 2021).
Less CO2 costs you extra money
The decrease in average CO2 emission increases the taxable benefit in kind for your current car.
Imagine you obtained a diesel vehicle from your company in 2019 with a 40.000-euro list price. The car has a CO2 emission of 100. The benefit in kind then equals 40.000 euro x 6/7 x (age) x CO2% = 34.285,71 euro x CO2%.
In 2019, the CO2 percentage equals ((100 - 88) x 0,1) + 5,5% = 6,7%. Therefore, the benefit in kind is 2.297,14 euro per year.
In 2020, the CO2 percentage equals ((100 - 91) x 0,1) + 5,5% = 6,4%, which gives a taxable benefit in kind of 2.194,29 euro. We multiply this by 94% as age adjustment: 2.062,63 euro.
In 2021, the CO2 percentage equals ((100 - 84) x 0,1) + 5,5% = 7,1%. The taxable benefit in kind now equals 2.840 euro. The age adjustment is now 94% so the taxable benefit in kind is 2.499,20 euro.
In other words, notwithstanding the fact that your car is three years old, the taxable benefit in kind is higher than for the first year.
It is to be expected that in the coming years the average CO2 emission will further decrease, since more employers invest in eco-friendly and electric cars.