Do you know the legislation in force on company cars?

Have you just gotten a promotion or a new job, and your package includes a company car? Congratulations ! Do you know the financial implications? Here is a quick summary of what to expect.

Taxation: what difference for me?

In Luxembourg, a company vehicle made available to the employee by the employer is considered a benefit in kind if the employee is authorized to use it for his private needs. This benefit in kind is an integral part of the employee's remuneration and will be valued on your pay slip between 0.5% and 1.8% of its new value (depending on the engine). This valuation must be added to your gross salary when calculating contribution deductions. For example, for a vehicle with a new value of €36,000, the monthly benefit in kind will be €648. For a gross salary of €5,000, after deductions of contributions, the vehicle will cost its user €176:

Example 1, for a gross salary of €5,000, tax class 1 and tax rate of 15% without company vehicle:

• Sickness, pension, dependency contributions: €613.50
• Taxable income of €4,270
• Taxes: €640.50
• Tax credit: €25
• Net salary: €3,771

Example 2, for a gross salary of €5,000, tax class 1 and tax rate of 15% with company vehicle whose benefit in kind is €648:

• Sickness, pension, dependency contributions: €692.55
• Taxable income of €4,850
• Taxes: €727.50
• Tax credit: €15.28
• Net salary: €3,595.23

The difference in net salary is €176, compared with the cost of a long-term rental or a loan!

Please note: in January 2025, the cost of the benefit in kind will increase from 1% to 2%, depending on the engine.

What obligations for the employee?

The employee who benefits from a company vehicle must sign an amendment to the contract stipulating:

• the cost of the benefit in kind;
• the maximum number of kilometres to travel and the procedure in the event of excess;
• the rules for using the vehicle (use, maintenance, etc.);
• the rules for vehicle maintenance and repair;
• insurance, franchise and breakdown assistance;
• the procedure to follow in the event of an accident, vandalism, or theft;
• the general responsibilities of the employee and the employer;
• etc.

Attention! The employee is responsible for the benefit in kind, not the cost of leasing itself. The cost of the benefit in kind is defined by the vehicle's class (CO2 emissions), of which there is a summary table. The cost of leasing is the employer's responsibility.

Calculation of the monthly benefit-in-kind application regime for vehicles registered before 01/01/2023

Calculation of the monthly benefit-in-kind application regime for vehicles registered between 01/01/2023 and 31/12/2024

Calculation of the monthly benefit-in-kind application regime for vehicles registered from 01/01/2025

Damage to the vehicle at the time of return: this is not the employee's responsibility!

When leaving the company or changing vehicles, you will be required to return the vehicle. Although it is generally stipulated that you must return it clean (exterior and interior), it is customary to take a tour of the vehicle with your employer to note possible damage.

Attention! Except in cases of willful acts or gross negligence, this damage is the responsibility of the employer and not the employee. Indeed, article L-121.9 of the Labor Code stipulates that “the employer bears the risks generated by the activity of the company”, including the risks linked to vehicles.

Therefore, your employer cannot claim reimbursement from you for any costs related to vehicle repairs: scratches, small paint jobs, etc., resulting from a fortuitous accident.

It is even more illegal for the employer to deduct them from your salary, and any clause in the contract or in an annexed document obliging you to cover such costs would be null and void.

Do not hesitate to contact our legal department if you find yourself in this situation. Even if you signed a document and gave your consent, each situation is unique, and it may be possible to retrace your steps! Contact our teams by email at legal@aleba.lu or by telephone at +352 223 228 1.