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

The basis for lifting the Swiss banking secrecy
Belgian-Swiss double taxation convention Amendment takes effect
On 10 April 2014 Belgium and Switzerland signed an Amendment of the Convention on preventing double taxation for taxes on income and on assets. This Amendment entails a number of significant innovations. For example, the Amendment contains an article on exchanging information within the double taxation convention between Belgium and Switzerland, with this provision being the basis for lifting Swis
The basic requirements appear to be identical
The new insolvency law will also affect those in liberal professions
Insolvency of companies Minister of Justice Koen Geens is steadily moving forward, and after a comprehensive overhaul of the Companies Code and the codification of the company law in the Economic Law Code, we are now set for the codification and updating of the insolvency law. The Law of 11 August 2017 saw a brand new and rather hefty Book XX added to the Economic Law Code, ‘Insolvency of compa
Establishing, requirements and consequences of a VAT group
How the Summer Agreement affects VAT groups
Establishing a VAT group in order to avoid losing the right to deduct input tax on the grounds of renting out immoveable property It is a regular event for a company (such as a real estate company) that is part of a group of companies to buy or build property, which it then makes available for use by another of the group’s companies (such as an operating company). The latter company will then p
Important things and pitfalls to consider
Working with self-employed persons: things to consider for cooperation agreements with self-employed persons
For most companies it is a daily part of life to work together with independent service providers and it is a highly flexible and easy form of cooperation.
A two-stage rocket: 2018 & 2020
Summer agreement: What will change for corporation tax?
You will no doubt have discovered from one of the many news stories that the federal government reached an agreement on 26 July 2017 on the corporation tax overhaul and its decreased rates. Other measures resulting from this ‘summer agreement’ are the tax on securities accounts, the expansion of flexible jobs, the option to make the rental of property subject to VAT and the reform of the tax o
Measures concerning self-employment, penalties, savings & flexible jobs
Summer agreement: more than corporation tax alone
You will no doubt have discovered from one of the many news stories that the federal government reached an agreement on 26 July 2017 on the corporation tax overhaul and its decreased rates. Other measures resulting from this ‘summer agreement’ are the tax on securities accounts, the expansion of flexible jobs, the option to make the rental of property subject to VAT and the reform of the tax o
What are the consequences and the opportunities?
Buying real estate in the Netherlands: are there tax benefits?
In recent years the purchase of property in the Netherlands has seen an uptick, especially in the beachside town of Cadzand, where 1,500 new apartments and houses are being be built between 2008 and 2020. This is the perfect opportunity to examine the (tax) consequences of buying real estate in the Netherlands and the opportunities it offers in respect of asset and inheritance planning. This artic
A refresher on the current state of affairs
Interest on savings accounts with foreign institutions: Belgian rapped over the knuckles again for its exemption
With tax return season lurking on the horizon it is a good idea to have a refresher on the current state of affairs with respect to the exemption for interest on savings accounts. The general rule as regards the exemption At the present, the first bracket of €1,880 (for tax year 2018, base sum of €1,250) of the income from regulated savings accounts (those accounts where the bank complies
The regional benefits have diverged completely
Home-owner taxes in the tax year 2017
'Own homes' have been a regional authority matter, since 2014. Even then, it was predicted that this would result in serious fragmentation and complication of the fiscal benefits for own homes. 
A reminder of the most significant tax-related points
‘For free’ is not always ‘VAT-free’
 ‘A free sample, a gadget with a corporate logo, rewarding faithful buyers and suppliers with a small gift…’ Every company is familiar with this situation, but are they also aware of the tax-consequences of these generous gestures? The tax authorities recently published a circular as a reminder of the most significant tax-related points for attention in this respect.  The rules&

Subscribe to our newsletter