Luxembourg plans emissions-based company car tax in 2017

December 01, 2016

Company car tax is set to change in Luxembourg in 2017 to a system based around carbon dioxide (CO2) emissions. The changes could prompt an increase in demand for low-emission cars in the country.

Employees currently pay company car tax at a flat rate based on 1.5% of a vehicle’s taxable value, but from 2017 this will change to a ‘polluter pays’ system, with tax bands that range from 0.5% to 1.8% depending on its CO2 emissions and fuel type.

Petrol cars, including hybrids, incur a lower percentage tax charge than diesel or diesel hybrids in the same emissions band.

The system will affect all new cars registered after the law comes into force. Legislators are expected to approve the rule change during December and introduce it on 1 January 2017.

Drivers of cars that emit 110g/km or less will see their tax bill fall, while those with cars that emit more than 150g/km will see their tax bill rise.

For example, the driver of a €30,000 car emitting 100g/km would incur a tax bill of €450 under the current system, but this would fall to €300 for the driver of a petrol car or €360 for the driver of a diesel vehicle.

A driver of a €40,000 car emitting more than 150g/km would currently incur €600 in tax charges, but this would rise to €680 for petrol and €720 for diesels.

Although the system increases taxes for diesels compared to petrol models in the same emissions bands, diesel engines tend to produce lower levels of CO2.

Therefore, they are more likely to fall into the lower tax bands than equivalent petrol models.

Electric vehicles will incur a 0.5% charge, but this is unlikely to create a significant company car tax advantage as their price is currently much higher than equivalent petrol and diesel options.

Figure 1: Changes to company car tax rules in Luxembourg 2016-2017

Source: Corporate Vehicle Observatory

Also in News & Insights

UPDATE: News & Insights have moved to the Autovista Group website

March 31, 2017

Our regular automotive industry News & Insights are no longer being published on the Autovista Group Market Reports website.

Instead, you can now find the latest updates at our central Autovista Group website, home to our pan-European brands including Autovista, Eurotax, Glass's and Schwacke.

To stay up to date with rapidly changing market trends, we recommend signing up to our free Autovista Group Daily Brief which delivers our daily news stories directly to your inbox.

You can still find our in depth market reports here on the Autovista Group Market Reports site. Keep checking back as we have an exciting new report due to be launched shortly!

PSA to boost UK presence in the event of a ‘hard Brexit'

March 08, 2017

UK sales flat despite upcoming road tax hike, diesel demand plummets

March 08, 2017

UK new car registrations fell annually by 0.3% in February to 83,115 units according to the SMMT, driven down by weaker demand from individuals and companies. More noticeable, however, was the 9.2% drop in demand for diesels compared to February 2016, a steeper drop than the decline in Germany...