King of the road: The Bulletin's guide to buying a car in Belgium

When you buy a new or second-hand car, you’ll first need to pay a ‘putting into circulation’ tax, with the amount determined by the power of the engine and its fiscal horsepower. This is a one-off payment that registers the vehicle in your name.

However, if you’re simply transferring the car to your spouse, you won’t have to pay it. In Flanders, the car’s environmental performance is also taken into account.

Then comes the actual circulation (or road) tax, an annual tax for use of public roads, based on the power of your engine and the vehicle’s maximum allowable mass. An additional charge applies to cars that run on diesel or LPG. Cars more than 25 years old and military and towing vehicles, however, are subject to a flat tax annually.

If you live in Wallonia, you’ll need to pay a licence fee if your vehicle is fitted with a radio with a cassette or CD player. To obtain this licence, which must be in the car at all times, email redevancetv@spw.wallonie.be. A minimum of third-party insurance is also required.

Running a company car has become a more viable alternative to ownership, though rules governing taxes were toughened up a few years ago. Formerly, company cars were taxed as a fringe benefit (or benefit in kind) according to the number of kilometres of private use and the car’s horsepower. So, the farther from your workplace you live, the more powerful the engine, the greater the tax bill.

In 2010, however, the government looked into ways of making company cars greener and CO2 emission rates became a factor in the final tax bill. The following year, the rules were revised again: the fringe benefit was now calculated on 6/7ths of the catalogue value (without rebates and discounts) of the car multiplied by a coefficient of 4-18%.

The coefficient was 4 for a diesel car with 80g CO2 emission or 100g for all other cars, increasing by 0.1 for every extra gram of CO2. If no data on emissions is available, the value is set at a default of 195g for a diesel car and 205g for petrol. The fringe benefit cannot be lower than €1,200 even for a ‘clean’ electric car.

The rules were amended further to take into account the age of the vehicle, and now for every year the car has been on the road, 6% can be deducted from the catalogue value – without falling below 70%.

According to tax specialist Marc Quaghebeur, these changes have led to plummeting sales of luxury cars as commuters are increasingly favouring cheaper models. Nevertheless, he says company cars still represent an advantageous fringe benefit.

The government is also encouraging private buyers to go green. In line with a European directive it introduced a fuel economy label that helps buyers assess the climate change impact of different models, from ‘green’ vehicles with low CO2 emissions and high mileage rates to high-polluting ‘red’ vehicles. This system was used in the past solely for public procurement, but now dealers must tag every vehicle.

In addition, all vehicles from mopeds to lorries are given an ‘eco sccore’ to reflect their overall environmental performance (greenhouse gases, noise pollution and impact on human health). The registration tax takes account of this score and discounts are available on low-emitting cars. For example, if you buy a new car with less than 105g CO2/km, you will qualify for a 15% reduction in the purchase price including VAT up to €3,280 - for 105-115g vehicles, the reduction falls to 3%, up to a maximum discount of €615.

Incentives also encourage people to buy electric vehicles. A tax credit of 15% of the purchase price (maximum €3,280) was introduced in 2010. Furthermore, individuals who install publicly accessible charging points qualify for a tax credit of 40%. Deductions are also in place for companies, and company EVs are exempt from registration tax and fully VAT deductible. The monthly rent (without the interest costs and the fuel expenses) is also 120% deductible.

Finally, it is worth noting, particularly for the self-employed, that running a car is a taxdeductible business expense. Lawyer Gregory Goossens explains: “The purchase price of the vehicle is depreciated over five years – 20% every year – and then you can deduct 75% of that amount. Interest payments are 100% deductible.”

The professional use of the car is also 75% deductible, excluding private use and home-work travel. “For the latter you get €0.15 per km and that’s it. So it all comes down to increasing the professional kilometres driven with the car to get the most out of it,” says Goossens.

Other deductible items include car loan interest payments, road and registration tax, car insurance, parking and toll fees, maintenance and repairs, annual technical check-up costs, expertise and legal expenses, and installation of mobile phone and car GPS.

This article was first published in The Bulletin Newcomer guide, autumn 2015