In Luxembourg, CO2 emissions from transport are too high, even though a lot of efforts have been made in the last two years. An additional effort must be made in the area of decarbonisation so that the climate objectives can be achieved, the Minister said. Adjusting the taxation of company cars will be “an important step” in this respect. The rate of the benefit in kind will be gradually modified in order to make vehicles with combustion engines less and electric vehicles more attractive fiscally. On Tuesday, Bausch presented the details of the draft ad hoc regulation.
When it comes to transport-related CO2 emissions, Luxembourg “really does not rank well”, Bausch acknowledged. In a European statistic from 2019, only Bulgaria is ranked lower than the Grand Duchy: And this is despite the fact that Luxembourg generally has “a recent fleet” and that residents replace their car more often than in other countries. However, the Minister pointed out that Luxembourg’s residents have a tendency to purchase “rather large cars”.
This is why the government wants to discourage companies from buying cars with internal combustion engines. Company cars fall under the benefit-in-kind scheme. These vehicles currently represent about 10% of the fleet. Until 2017, an employee was taxed monthly on 1.5% of the value of the car. The first adjustments were made in 2017 and now there will be a regime with new rates, although there will be few changes at first: “For all contracts in 2021, for the whole period, the old conditions still apply, even if the car will only be delivered in 2022.”
The old regime will still apply this year to contracts signed in 2022. From 2023 onwards, the calculation of the benefit-in-kind rate will be based on engine type and emissions. For the majority of vehicles with CO2 emissions above 80 g/km, the rate increases by +0.2%. The maximum rate of 1.8% will apply from emissions above 130 g/km. For zero-emission cars, the rate will remain at 0.5%, but a small difference will be made according to the amount of electricity consumed: “The rate will remain at 0.5% for [vehicles] that do not exceed 18 kWh/100km. For those that consume more, a rate of 0.6% will be applied.”
Example: the estimated annual benefit in kind for an employee with a gross annual salary of €70,000 euros and a car worth €40,000, applying a rate of 0.5%, is €4,000 compared to the acquisition of the same car in his own name. With a rate of 1.8%, this results in a disadvantage of €175.
From 2025 onwards, the rate will be increased to 1% for electric vehicles, or 1.2%, if the electricity consumption is higher than 18 kWh/100km. For all other internal combustion engine vehicles, the rate will increase to 2%. The government estimates that from 2025 onwards, only zero-emission vehicles will “still be attractive and interesting”, as at a 2% for combustion engine cars, companies would actually make a loss.
The objective is thus clear. Minister for Mobility François Bausch also stated that he does not share the fears of the sector that the leasing market will suffer. The Minister is also aware that the infrastructure must be further developed and promises that this will be done.
The full report in Luxembourgish by RTL Télé:
