Stricter car taxation for nonprofit organizations: tax on car expenses starting in 2026

For a detailed overview of the changes in corporate tax, we refer to our earlier publications from February 21, 2022 (Transitioning to an environmentally friendly fleet… with the tax authorities’ help?) and September 20, 2022 (Tax greening of motor vehicles: the first deadline is fast approaching).

Impact on legal entity tax

The legislation has far-reaching consequences for nonprofits and other entities subject to legal entity tax (excluding public institutions). Until now, car expenses for these entities have remained untaxed. Only the value of making a vehicle available is currently partially subject to legal entity tax (17% or 40%, depending on the situation). This remains unchanged but will, as of 2026, be supplemented by a tax on incurred car costs.

The legislation has far-reaching implications for NPOs and other entities subject to legal entities tax (excluding public entities). Until now, car expenses at these entities remained untaxed. Only the value of the provision of vehicles is currently partly subject to the legal entities tax (17% or 40%, depending on the situation). This will be supplemented from 2026 by a tax on actual car expenses.

From 1 January 2026

The taxation of car expenses under the legal entity tax applies to vehicles purchased, leased, or rented from January 1, 2026 (tax year 2027) onwards. The relevant date is the order date (for purchases) or the contract signing date (for leases or rentals). The delivery date is not relevant.

This regulation applies to the following vehicles:

• Passenger cars designed and intended for non-remunerated passenger transport;

• Dual-use vehicles designed for both passenger and cargo transport;

• Minibuses for transporting more than five but fewer than nine people;

• Light trucks that, despite their classification, are considered passenger cars for tax purposes.

CO₂ emissions determine taxability

Vehicles with CO₂ emissions

For vehicles with emissions, purchased or leased from January 1, 2026, car expenses will be 100% taxable under legal entity tax.

The costs of vehicles purchased or leased by December 31, 2025, will remain untaxed, even in subsequent years.

Vehicles without CO₂ emissions

For zero-emission vehicles (electric or hydrogen-powered), a gradual taxation will apply, starting January 1, 2027. The taxable percentage increases annually:

• 5% taxable if purchased, leased, or rented from 1/1/2027;

• 10% taxable if purchased, leased, or rented from 1/1/2028;

• 17.5% taxable if purchased, leased, or rented from 1/1/2029;

• 25% taxable if purchased, leased, or rented from 1/1/2030;

• 32.5% taxable if purchased, leased, or rented from 1/1/2031.
  

The costs of zero-emission vehicles purchased, leased, or rented before December 31, 2026, will remain untaxed in subsequent years.

Note: This division of a car fleet for legal entity tax purposes—depending on the type of vehicle and the date of purchase/lease/rental—will significantly complicate administration.

Tax rate

The newly taxed car expenses will be subject to a 25% tax rate. If insufficient advance payments are made, a penalty for negligence may apply.

Which costs are taxable?

The taxation applies to all costs related to passenger cars, as recorded in the accounting records. This includes, among others:

• Depreciation;

• Leasing and rental costs;

• Fuel costs;

• Insurance;

• Road tax;

• Maintenance and repairs;

• …
  

Reimbursement of car expenses via an expense note, such as kilometer allowances and taxi costs, is also considered a car expense and is therefore taxable.

Exception: The financing cost (interest) for vehicles remains untaxed.

If a vehicle is made available to someone, the taxable car expenses can be reduced by the value of the benefit in kind or by any personal contribution.