As of a few weeks ago—the first of January, 2018—non-electric company cars in Luxembourg are now taxed according to how environmentally-friendly they are, instead of according to a flat rate. The government's aim with the new tax is to incentivise companies to buy eco-friendly automobiles, and follows similar tax changes on electric cars and bicycles last year. Read on for more details.
Taxes on company vehicles in Luxembourg
All company cars are liable to two different types of taxes, a registration tax and a vehicle tax. The former, amounting to €50, must be paid on any newly registered car. The latter is calculated by multiplying three elements together: (1) the value of the CO2 emissions in g/km; (2) a value of 0.9 for cars with a diesel engine, or 0.6 for cars with a non-diesel engine; and (3) a value of 0.5 for vehicles whose CO2 is less than 90 g/km, increasing by 0.1 for each additional 10g of CO2.
Here are a few examples:
Allowances for newly registered cars
In order to encourage lower emissions, the government has said that newly registered hybrid vehicles emitting 50g of CO2 or fewer are eligible for a tax allowance of €2,500 (implemented as of 1 January 2018). This measure plays off similar ones taken in 2017, when tax allowances of €5,000 for 100% electric vehicles and €300 for cycles were introduced. To be eligible, hybrid vehicles must be Category M1, i.e. have a maximum of nine seats (driver's seat included).
Benefit in kind for employees
Further to the 2017 tax reform, the benefit in kind for vehicles depends of the type of engine. Indeed, diesel engines are now taxed at a higher rate of 0.2% than a petrol engine in the same CO2 category. Electric cars have a tax rate of 0.5% and hybrid cars 0.8%—for these, the benefit in kind varies between 0.5% up to 1.8% of the car's value (VAT included).
All these changes have been summarised in the tables below:
Investment tax credit for vehicles
As part of the 2017 tax reform, the government has also increased the complementary and global investment tax credits from 12% to 13% (without limitation), and from 7% to 8% up to €50,000 per eligible vehicle as listed below:
- vehicles assigned exclusively to the business of transporting persons or forming part of the net assets of a car rental company
- vehicles assigned exclusively to the transport of goods or merchandise
- vehicles assigned, within an enterprise, exclusively to the transport of employees to or from their place of work, provided that such vehicles are allowed to circulate with a capacity of at least nine occupants (including the driver)
- vehicles specially fitted out exclusively for use as a breakdown/repair service
- self-propelled machinery
The complementary and global investment tax credits shall also be granted for the acquisition (up to an acquisition price of €50,000 for the global tax credit) of certain electric and hydrogen passenger cars in Category M1 whose first registration is made after 31 December 2017 (implemented as of 1 January 2018).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.