What is the taxable benefit for private use of a company car ?
If your remuneration package includes a company car, or if you are a business owner and have a car registered in your company’s name, this will automatically trigger a benefit in kind if the car is also used privately. The taxable value of the benefit is calculated on a lump-sum annual basis and a pre-set formula, irrespective of the number of private kilometres. The formula used is the following:
catalogue price × 6/7 × CO2 percentage × car age factor
The taxable benefit is calculated by multiplying a CO2 coefficient by 6/7 of the car’s catalogue price. Subsequently, this amount is further decreased depending on the age of the car. Therefore, the initial purchase price and how polluting and how old the car is will together determine on what benefit you will annually pay taxes.
As soon as the car has been registered for more than 12 months, the catalogue price will be reduced by 6% per year, with a maximum of 30%. In other words, if a car is older than 5 years, the catalogue price to include in the above formula will be reduced to a maximum of 70%.
In respect to the catalogue price, it should be noted that this does not represent the price you actually paid for the car (especially not if it is a second-hand or leased vehicle), but the listed catalogue price of a new car (incl. options and VAT, but excl. car dealer discounts).
The CO2 emissions and the fuel type of the company car will also impact the benefit in kind. The basic coefficient is 5.5%, which corresponds to CO2 emissions of 91 g/km for petrol, LPG, or natural gas cars (tax year 2023) and 75 g/km for diesel cars (tax year 2023). These coefficients are adjusted every year. If your car’s CO2 emissions are higher, the basic rate will be increased by 0.1% per additional gramme of CO2/km (to a maximum of 18%) and will be decreased by the same 0.1% if its CO2 emissions are lower (to a minimum of 4%). The minimum taxable benefit in kind for a company car is currently set at €1,400.00 per year (2022), which applies, for example, to electric cars.
The taxable benefit will normally be included in your monthly salary calculation and subject to both income tax and social security contributions. You could further reduce the taxable value of the benefit, by paying a personal contribution to the employer for the private use of the car.
If the company also makes a fuel card available, this will not have any impact on your personal income taxes or social security. The taxable benefit in kind for you is the same with or without a fuel card. Instead, this will only have consequences at a corporate tax level, but not for the employee or the company director personally.
TAXPATRIA® can assist with reviewing your company car policy and tax-friendly remuneration package for your employees and executives.