Context

As you may know, the determination of the benefit in kind resulting from the private use of a company car should in principle be based on the actual number of kilometres an employee uses the car for private purposes. This is based on a minimum number of 5.000 private kilometres per year. For this purpose, commuting is also considered as private use of the company car, both from a Belgian personal income tax and social security point of view. The number of kilometres is then multiplied by an amount representing the lump sum taxable benefit in kind per kilometre.

Although the taxable benefit in kind resulting from the private use of a company car should be calculated on the basis of the actual number of private kilometres driven per year, it is common practice that companies determine the taxable benefit in kind on a lump sum basis. Indeed, from a practical point of view, it is costly and time-consuming to determine for all employees the actual number of kilometres they have used the car for private purposes. For this reason, agreements can be made in this respect with the corporate tax inspector, lately often based on the so-called ‘concentric circle method’.

However, the tax authorities recently investigated this issue in more detail and often rejected lump sum approaches that were proposed. The risk of substantial tax increases became more and more a concern.

News

According to an official press release of 27 November 2003, the Belgian Minister of Finance confirmed that the tax legislation regarding the company cars would not be changed.

He also stated that the rules stipulated in the administrative circular with respect to the determination of the benefit in kind regarding the private use of a company car by Belgian public officers will be applied as a “general rule”. For your information, according to this circular and to the internal note in this respect issued by the tax authorities, the mileage for the private use (commuting and other private kilometres) of a company car can be fixed at 5.000 km where the distance from home to work is lower than 25 km and at 7.500 km where the distance is higher than 25 km.

Please note that a couple of things need further clarification, e.g. :

1) As from when will these rules be applicable as ‘a general rule’ and
2) How does this impact any agreements that may already have been concluded with a tax inspector, particularly those that result in a higher benefit in kind than the benefit resulting from the statement made by the Minister.

Please note also that the press release only covers the income tax treatment. The social security treatment is not covered.

Press release:
French http://news.hrservices.be?lk200312031
Dutch http://news.hrservices.be?lk200312032

Circular:
French http://news.hrservices.be?lk200312033
Dutch http://news.hrservices.be?lk200312034