The employee pays for his company car: multiple consequences
July 2021 – When an employee is provided with a company car, he is taxed on a benefit in kind. If the employee pays a contribution for this company car, this contribution is deductible from the benefit. However, it would appear that the costs that the employee personally pays are not deductible from the taxable benefit.
Deductibility of car expenses and benefits in kind
The tax deductibility of car expenses is severely limited for both natural persons and companies. In short, the deductibility depends on the CO2 emission of the vehicle.
However, if the vehicle is a company car, the provision of the vehicle gives rise to a benefit in kind for the employee and the company car is in fact remuneration. And remuneration is not subject to any limit in terms of deductibility.
Let us imagine, for example, that the car costs 10 000 euros per year. And let's imagine that the benefit in kind amounts to 3 600 euros. You can deduct the benefit in kind from the car expenses (this leaves an amount of 6 400 euros). You must apply the deduction limit to this amount. In the following we will assume that the deduction limit is 75%.
What does this mean in practice? In your accounts, car expenses are deducted normally. But in your corporation tax return, the non-deductible part of these car expenses is added to the non-deductible expenses. The amount to be included as disallowed expenses would be 6 400 euros x 75%.
The worker's contribution
Let us now imagine that the employee pays a monthly personal contribution for the company car. If, for example, he pays 50 euros per month, i.e. 600 euros on an annual basis, the taxable benefit is not 3 600 euros, but 3 000 euros.
The question then arises as to how much should be included in disallowed expenses. 75% of 6 400 euros or 75% 7 000 (because the taxable benefit in kind is now only 3 000 euros).
Brussels Court of Appeal
In a case brought before the Brussels Court of Appeal in 2017, an employer made a company car available to his employee. But the employee paid the exact amount of the benefit for this company car. The employee therefore did not receive any taxable benefit.
The tax authorities concluded that the limit for deducting car expenses should be applied to the total amount. There was in fact no longer any advantage...
But the Brussels Court of Appeal disagreed with the tax authorities.
The Court considered that the deduction limit applies to the person who has to bear the costs. In other words, insofar as it is the member of staff who bears the costs (because of the reimbursement), the limit on the deduction of car expenses must be applied to him, and not to the person to whom the costs are reimbursed. The fact that the staff member does not declare the expenses is irrelevant in this respect.
Court of Cassation
The case was eventually brought before the Court of Cassation. The Court of Cassation recently ruled in the same way as the Brussels Court of Appeal. In the end, only the professional use by the company is subject to the deduction limit. Insofar as there is no professional use of the vehicle by the company as a result of the granting of the benefit, there is no deduction limit.
The fact that the company is reimbursed for the exact amount of these expenses is irrelevant for the deduction limit.
The employee personally incurs costs
There is also a discussion before the Antwerp Court of First Instance which, at first sight, was not directly related to the deductibility of car expenses. In this case, a bank made a company car available to its employees. The employees were taxed on this benefit in accordance with the usual assessment rules.
However, the employer deducted from the taxable amount all sorts of small expenses that the employee paid himself, such as the cost of a car wash, the cost of replacing a windscreen wiper and the cost of petrol abroad. The worker therefore did not pay a personal contribution, but did bear some costs. The question was whether these amounts could be deducted from the lump sum benefit in kind.
Personal contributions are undoubtedly deductible. This is simply stated in the law. But can the payment of certain expenses be treated as a personal contribution? The tax authorities thought not, and the Antwerp court confirmed this view. Their reasoning is that the costs that the employee bears personally are not part of the lump-sum benefit in kind and therefore cannot be deducted.
No personal contributions and therefore no impact on disallowed expenses
Although taxation does not rhyme with logic, it must be concluded that the sums that workers spend on their company cars in this way cannot be deducted from the taxable benefit, but that they also have no impact on the amount of non-deductible car expenses.
It remains to be seen whether the Minister of Finance, in the context of the announced reform of the deductibility of company cars, will not try to counteract the case law in favour of the taxpayer with a new law.
