The first important change is the new tax deduction rule for car and fuel expenses in both corporation tax and personal income tax. In Personal Income Tax commencing 1 January 2018, the fixed deduction of 75% for car expenses is abolished. In order to harmonise the tax rule concerning car expenses, a deduction rule currently applied in corporation tax will be implemented.
From 1 January 2020, the introduction of a renewed, uniform deduction rule will completely harmonise the taxation of all vehicles in both personal and corporation tax. In Corporation Tax the deduction rule for car and fuel expenses as it exists today shall remain unchanged up to and including 31 December 2019. Commencing from 1 January 2020, the new deduction rules will apply. This amendment introduces a new method for calculating the percentage of deductions for both car and petrol expenses. This means as from 1 January 2020 petrol expenses will follow the same regime as car expenses and will therefore be deductible according to the CO2 emissions of the vehicle in question.
In the renewed legislation, companies will see the company car cost deduction being determined following a new formula: 120% – (0.5% x coefficient x CO2g/km).
With the coefficient established as follows:
These new rules apply to all vehicles ordered from the 1st of January 2018 onwards. Cars ordered and/or registered before that date will keep their deductibility based upon the existing rules. Costs for financing a company car are explicitly excluded from the scope of the new deduction rule, and therefore remain 100% deductible.