Belgian government pushes electrification of company cars

01 June 2021

The Belgian government has approved a bill proposed by the Minister of Finance, Vincent Van Peteghem, which seeks to make the country’s mobility sector greener.

In the future, only emission-free company cars will be tax-deductible, and both individuals and businesses will be able to use tax incentives to install charging stations at home or in the workplace. 

Belgium sees company cars as the ′ideal lever’ to achieve its climate ambitions. ‘Not only do company cars drive a lot more kilometres on average than private cars, but it is also these same cars that then find their way into our second-hand market and therefore become private cars.

It is this acceleration in the number of carbon-neutral cars that the fight against air and noise pollution urgently needs. It is an acceleration that will also strengthen our country’s climate ambitions.’ The ultimate ambition of the government’s plans is for all new company cars to be carbon-neutral by 2026.

However, at the start of the current year, only 2.3% of the Belgian company-car fleet was electric. ′A tax incentive for company cars without carbon emissions and the installation of electric-charging stations are, along with the simplified mobility budget, the levers par excellence to accelerate the greening of our mobility and our vehicle fleet.

Without affecting existing contracts, this bill takes important steps towards better air quality and better quality of life.’ Van Peteghem commented

ICE tax-deductibility phase-out 

In a transitional phase to 1 July 2023, the current tax-deduction regime will continue to apply for cars with internal combustion engines (ICE).

However, between this date and 31 December 2025, the deductibility will be reduced and then capped – at 75% in 2025, 50% in 2026, and 25% in 2027, before being phased out entirely in 2028. Similarly, the 100% tax deduction for zero-emission passenger cars will be phased out from 2026 onwards, reducing to 95% in 2027, 90% in 2028, 82.5% in 2029, 75% in 2030 and 67.5% from 2031. 

′We are gradually reducing the tax deductibility of carbon-free passenger cars to the current level known for fossil-fuel passenger cars. We do not intervene in existing contracts. Each employer will always be able to offer his employees a gasoline or diesel car. Free choice remains, but polluting company cars will no longer be able to count on a tax advantage,’ Van Peteghem explained. For hybrid company cars acquired from 1 January 2023, the tax-deductibility of petrol or diesel fuel costs will be limited to 50%. The aim is to encourage the driving of hybrid cars in electric mode. 

Charging-network tax breaks 

Belgium’s government recognises the need to increase the number of charging points, both at home and at work, in order to support the electrification of the fleet. 

Accordingly, property owners or tenants who purchase and install a charging point at home between 1 September 2021 and 31 August 2024 will benefit from a reduction in investment tax. In order to speed up the process, however, ′the reduction will be systematically eliminated over time.’

The tax reduction is 45% between 1 September 2021 and 31 December 2022, but will drop to 30% in 2023 and 15% in 2024. The charging station should be smart, i.e. with the ability to control charging time and power, and can only use green electricity.

There is also a cost limit of €1,500 per charging point and taxpayer to be eligible for the tax reduction. Companies that invest in charging points with public access benefit from an increased deduction of costs. Again, the deduction will be phased out in order to rapidly accelerate the number of charging points.

For investments made between 1 September 2021 and 31 December 2022, a tax-deduction rate of 200% will be applied. This reduces to 150% for investments made between 1 January 2023 and 31 August 2024. These points must be freely accessible to third parties either during or outside normal opening hours, if not both. 

′Anyone who chooses today to invest in charging facilities can count on our support. The tax benefit will be phased out, year after year, for both individuals and businesses, as these facilities are needed now.

For companies, we ask that the charging installation be provided in a semi-public place, such as a company car park. This way, people who live nearby can also charge their car outside of office hours, against payment,’ Van Peteghem emphasised. 

Simplified mobility budget 

Finally, the new proposals also include work on a new ‘modal shift’ in mobility. The mobility budget is, therefore, being ′simplified, relaxed and extended’ and will be accessible to all employees who have a company car or are eligible for one. 

Belgium’s mobility budget has previously been heavily criticised. Most industry players and analysts see it as pointless since it would not achieve the reductions to pollution and improvements to congestion that were its purpose.

The idea was to encourage Belgian company-car drivers to exchange their vehicles and use mobility services such as ridesharing, public transport and cycling. ′In order to make the transition to greener and more sustainable mobility more impactful, we need to reach as many people as possible.

The strengthening of the mobility budget should make it possible to introduce more people to sustainable options for commuting, such as public transport or cycling,’ Van Peteghem acknowledged when discussing the latest plans.