You have just signed a car financing agreement with your broker and you are wondering about the taxes associated with your vehicle. The purchase and use of a vehicle are taxed in different ways. However, the tax administration also grants you some tax deductions. Here is an overview.
Taxes
- VAT: Are you buying a new vehicle? You pay 21% VAT on the final price. Are you buying a used car? It all depends on the person selling it to you:
- An individual: VAT is not applicable
- A VAT-registered person: 21% VAT on the profit margin or 21% VAT on the total price.
- Registration tax: The registration tax is collected during the first registration of the new or used vehicle in your name. Its amount depends on the engine capacity (fiscal horsepower) and/or power (KW) as well as the age of the vehicle.
- Annual road tax: This tax is levied on your engine’s power, engine capacity (fiscal horsepower), or the maximum authorized masses (MMA) of the vehicle. If you change vehicles, your new tax will be deducted from the surplus already paid for your old vehicle.
Tax Deductions
- Deductibility of interest: if you take out a loan for your car, your monthly payment includes the repayment of the principal and the payment of interest. Do you opt for the deduction of actual professional expenses? You can then fully deduct the interest related to the professional use of your car.
Example: On February 1, 2011, you take out a loan of 7,500 euros over 36 months at an annual effective rate of 5.75%. For 2011, the total interest to be considered amounts to 309.38 euros. This is the total interest for the first 11 months according to the amortization schedule linked to your contract. Suppose 70% of your car expenses are professional. For the 2011 income year, you can therefore deduct 216.57 euros (70% of 309.38 euros).
Simulate your car loan online
Note, regarding motorcycles, all expenses are 100% deductible