written by
Jeroen Beuls

What fiscal aspects should you consider when calculating TCO?

TCO 2 min read , November 29, 2023

The TCO, or Total Cost of Ownership, is complicated to calculate. Therefore, we give you a straightforward overview of the various fiscal aspects you need to consider to calculate your TCO.

Tax deductibility of TCO

Costs related to your company car that are not deductible are considered 'disallowed expenses' and fall under corporate income tax. That is, the employer cannot deduct these costs from his/her taxable income. Thus, taxable income increases and the employer ends up paying more corporate tax. Thus, the greater the tax deductibility, the more advantageous.

To calculate tax deductibility, use the following formula:

120% – (0,5% x coefficient* x CO2/km) *1 for diesel commercial vehicles; 0.9 for natural gas commercial vehicles (< 11 hp); 0.95 for other commercial vehicles.

Newly purchased, leased or rented non-emission-free company cars are subject to the extinction scheme in terms of tax deductibility. In reality, tax deductibility will fall by 25 per cent every year from 2025 onwards. That means you will have a tax deductibility of no more than 75 per cent in 2025.

Non deductible expenses

Moreover, as if that weren't enough figures, the current lower limits of 40 and 50 per cent will also fall away in 2025. Thus, from 2028, all costs related to a company car will be 'disallowed expenses', and subject to corporate income tax.

Company cars purchased from 2026 must be completely emission-free if you want to deduct them for tax purposes. The tax deductibility of zero-emission company cars only starts to gradually decrease from 2027.

Also remember that part of the Benefit All Nature is considered a disallowed expense. Namely, this is 17% if the fuel cost is not paid by the employer, and 40% if it is. The corporate tax on this must be included in the calculation.

VAT deductibility when calculating TCO

Also important for your TCO: You do not have to pay all the VAT, as part of it is deductible. VAT deductibility is determined by the ratio of professional mileage to private and commuting mileage. How much VAT can be deducted is determined quantity of professional kilometres namely determines how much VAT can be deducted. The VAT deductibility will never exceed 50%.

There are three methods to figure out VAT deductibility. They are briefly explained below.

  • The 'actual professional use' method is a way with a lot of administrative work. The employee keeps track of all his professional trips on paper to determine how many kilometres he actually travels for professional trips compared to the total kilometres driven.
  • The 'semi-flat' method uses a formula based on the commuting distance of the employee(s). % Professional use = 100-((Commuting distance x 2 x 200 + 6000) / total numbers of km)
  • The ‘semi-flat’ method allows the employee to deduct 35 procent VAT. This method is most commonly used as many employees do not reach 35 per cent professional mileage.

CO2 solidarity contribution

The CO2 solidarity contribution is a social contribution at the expense of the employer based on the CO2 emissions and fuel type of the company car. The various formulas can be found below and this way you can calculate the CO2 contribution for 2024. The minimum contribution of €31.99 (2024) is used if the result of the calculation is lower respectively.

  • (Plug-in hybrid) diesel - [(CO2 emission x 9) – 600] / 12 x 1,5359 x 2,25
  • (Plug-in hybrid) petrol - [(CO2 emission x 9) – 768] / 12 x 1,5359 x 2,25 CNG [(CO2 emission x 9) – 990] / 12 x 1,5359 x 2,25
  • Electric/hydrogen - For these company cars, the minimum contribution is €31.99 per month (2024).

More questions about TCO? Read all about how to calculate the total cost.

TCO Fiscality