Switch to a light truck and enjoy numerous benefits

As a self-employed worker, have you calculated and analysed how much your passenger car actually costs you on an annual basis? Anyone who does this exercise soon notices that the Belgian government takes the biggest piece of the pie. As well as the lucrative income that the government draws from fuel consumption, the reduced tax deductibility of car expenses – both for VAT and for direct taxation[1] – is also an important source of income for the State. Not to mention the new car registration tax and the road tax.

No wonder cars are known as the "tax cash cow".

But if you opt for a light truck, you can bring the costs down considerably.

Seeing a vehicle as a tool not a status symbol

We know that purchasing a vehicle is often based on emotional rather than rational considerations. After all, who wouldn’t rather drive a high-class vehicle?

As a self-employed person, it can be important to drive a beautiful vehicle or a certain make of car, if only to show how successful you are as an entrepreneur.

But if you attach less importance to that aspect, you can save a fair bit by taking a prudent approach.

You can make the invoice for your vehicle expenses quite a bit ‘lighter’ if you opt for a light truck.

A light truck offers numerous tax benefits

Purchasing a light truck offers numerous tax benefits. To start with, you won’t pay the new car registration tax. The road tax rate is also more advantageous. Depending on the maximum authorised mass, expressed in kg, you’ll pay between €34.45 and €148.76 annually[2].

In addition, all business expenses relating to the light truck are 100% deductible, regardless of whether you carry out your professional activities as a sole trader or through a company. This is in contrast to the deduction of car expenses, which are limited to 75% for a sole trader, or which can be deducted based on CO2 emissions in the case of a company[3].

Unlike for a passenger car, you can claim accelerated (degressive) depreciation on a light truck as a tax expense. Any additional expenses associated with the purchase can just be written off. For a passenger car such costs must be depreciated at the same rhythm as the vehicle.

If you work as a sole trader, you will be eligible for the investment deduction if you use the vehicle solely for business purposes.

In terms of VAT, the 50% deduction limit does not apply to light trucks as it does to passenger cars.

Good to know: whether you use the vehicle for transporting goods is irrelevant to your eligibility for the tax benefits! The tax authorities cannot deny you the benefits if your company’s activity consists solely of delivering services.

Calculating the benefit in kind with regard to private use

If as a manager (or employee) you drive a passenger car belonging to the company, you will be taxed for your private use of that vehicle as a benefit in kind. That benefit is calculated on the basis of the following formula: Benefit in kind = CO2 emissions in g/km x 5,000 km or 7,500 km x CO2 coefficient.

If you use a light truck for private purposes, the benefit in kind is not calculated on the basis of that formula. In that situation, the benefit is established on the basis of the actual value as it applies to the purchaser. Accordingly, consideration is given to the actual number of kilometres travelled for private use, instead of the minimum of 5,000 km or 7,500 km according to whether you live more than 25 km from your fixed place of employment[4]. In practice, the benefit in kind is calculated as follows: actual vehicle costs x (private kilometres/total number of kilometres travelled).

This method of calculation could have both advantages and disadvantages for your personal situation, depending on the actual vehicle costs combined with the number of kilometres travelled for private use.

Which types of light trucks fall within the favourable tax regime?

The following four categories of vehicles are considered to be light trucks, if they meet the conditions set out below:

1. Single-cab pick-up trucks

  • A fully-enclosed single cab, separate from the cargo area, which contains up to two seats in addition to the driver’s seat
  • An open cargo area, which may or may not be enclosed with a tarpaulin, cover or other structure to protect the load

2. Double-cab pick-up trucks

  • A fully-enclosed double cab, separate from the cargo area, which contains up to six seats in addition to the driver’s seat
  • An open cargo area, which may or may not be enclosed with a tarpaulin, cover or other structure to protect the load

3. Single-cab delivery vans

  • A passenger compartment which contains up to two seats in addition to the driver’s seat
  • A cargo area which is separated from the passenger compartment by a partition at least 20 cm high or, in the absence of a partition, by the backrests of the single row of seats
  • A cargo area of which the length must equal at least 50% of the length of the wheelbase
  • A cargo area of which the entire surface consists of a fixed or permanently-attached horizontal load floor forming part of the bodywork, with no anchor points for additional seating or safety belts

4. Double-cab delivery vans

  • A passenger compartment which contains up to six seats in addition to the driver’s seat
  • A cargo area which is fully enclosed from the passenger compartment by a non-removable continuous wall made from a hard material across the full width and height of the interior space
  • A cargo area of which the length must equal at least 50% of the length of the wheelbase
  • A cargo area of which the entire surface consists of a fixed or permanently-attached horizontal load floor forming part of the bodywork, with no anchor points for additional seating or safety belts

Monitoring of the above technical characteristics, inherent in the tax definition, is performed through the technical inspection that each business vehicle has to undergo before being put on the road for the first time.

If the length of the cargo area is equal to at least 30% of the wheelbase, in technical terms people call it a light truck, but for tax purposes such a vehicle is considered to be a passenger car. With all the negative tax consequences that entails ...

Specifically, luxury SUVs such as a BMW X5 or Porsche Cayenne are not considered to be light trucks for tax purposes. On the other hand, an Opel Vivaro, Mercedes Vito, Renault Kangoo Express, Citroën Berlingo, etc. would be fine, and would make you eligible for the tax benefits.

As a practical rule of thumb, always check the inspection certificate. On the far right-hand side of this document, on the line with the number plate and the mileage, there’s a percentage. If it’s 50% or more, the vehicle is a light truck.

 

[1] In particular, personal and company income tax
[2] These amounts are index-adjusted on 1 July of each year
[3] Excluding financing costs and the cost of a mobile car kit, which are still 100% deductible, both for sole traders and for companies.
[4] Question No. 5236 from Mr Van der Maelen dated 01/02/2005

 

Authors: Bart Vermoesen and Marc Ottevaere

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