Company car benefit in kind in Luxembourg: 0.5 %, 0.6 % or 2 % in 2026, and what changes in 2027

In Luxembourg, the benefit in kind (BIK) of an electric company car is 0.5 % or 0.6 % of its catalogue price including VAT per month, against 2 % for combustion cars and plug-in hybrids registered since 2025. For a €50,000 electric car, the taxable benefit is therefore €250 a month, compared with €1,000 for a combustion car at the same price.

This guide is for HR, payroll and drivers. It explains the rates and their conditions, the calculation base for purchased, leased and used cars, worked examples with the employee's net cost, the choice between flat rate and logbook, the calendar up to 2030, employee contributions, cross-border workers and an often forgotten point: electricity charged at home. Voltaback, which reimburses home charging for more than 200 client companies, provides the measured kWh that let you handle it properly.

What is the company car benefit in kind?

When an employer provides a car that the employee may also use privately, that private use is a benefit in kind (avantage en nature in French, Sachbezug in German, often shortened to ATN or BIK). It is part of taxable salary (articles 95 and 104 of the income tax law, L.I.R.) and subject to social security contributions. Commuting between home and work counts as private use.

The rule covers cars owned, leased or rented by the employer, in category M1 (at most eight seats besides the driver's). A vehicle used only for work, which stays on the company site overnight, creates no benefit in kind.

The amended Grand-Ducal regulation of 23 December 2016 offers two valuation methods:

• the flat rate: a monthly percentage of the catalogue price, depending on the powertrain;
• the logbook: private kilometres multiplied by the car's cost per kilometre, established by the employer.

The flat rate is by far the most common, because it needs no trip tracking. Source: Grand-Ducal regulation of 23 December 2016, coordinated text (Chamber of Commerce).

Why the electric car changes everything

No other line of the car policy reacts so strongly to the powertrain. At the same catalogue price, the benefit of an efficient electric car is four times lower than that of a combustion car. For the employee, that means several thousand euros less tax and contributions a year; for the employer, lower employer contributions on that benefit. In Luxembourg, the flat rate is the strongest tax argument for the electric company car, stronger than the purchase grant or road tax.

The market follows. In 2025, 26.9 % of new registrations in Luxembourg were fully electric, 31 % in April 2026, and according to the Arval Barometer 2026, 70 % of companies have introduced electrified vehicles or plan to within three years. Source: Paperjam, Arval Barometer 2026.

Flat rates in 2026

The rate depends on the powertrain and, for electric cars, on the homologated consumption and power.

For electric cars, these rates apply when the contract is signed by 31 December 2026 and the car is registered by 31 December 2027, under the regulation of 20 December 2024. Combustion cars and hybrids registered before 2025 keep the earlier CO2-based rates of their own regime (2017-2021 or 2022-2024, depending on contract and registration dates), and plug-in hybrids have received no purchase grant since 2022. Sources: Klima-Agence, benefits in kind for company cars, ACD (direct tax administration), newsletter of 10 January 2025.

The base: catalogue price, not the price paid

The percentage applies to the total purchase price of the new vehicle, including options and VAT, minus any discount granted. Three practical consequences:

• options count, including 17 % VAT;
• the dealer discount is deducted, but a purchase grant such as the Klimabonus is not;
• the base is the same for a purchased, leased or used car: always the new price.

With leasing, what counts is not the monthly rental but the new price the leasing company states for the car. For a used car, the original new price applies, even if the car is now worth half. A three-year-old electric pool car therefore has the same benefit as on day one.

Consumption: the WLTP value on the certificate of conformity

The 18 or 20 kWh/100 km threshold comes from the car's certificate of conformity (COC), in the WLTP cycle. It is the homologation value, not real-world consumption. A car that uses 21 kWh/100 km in winter stays at 0.5 % if its COC says 17.5. The registration certificate and the COC are the evidence payroll should keep.

Watch the variants: bigger wheels, all-wheel drive or a more powerful version of the same model can push the WLTP value above 18 kWh/100 km or the power above 150 kW. The configuration decides, not the model name.

Do not confuse this threshold with the 16 kWh/100 km limit of the Klimabonus Mobilitéit purchase grant: they are two different rules, and some European summaries mix them up.

Worked examples

Example 1: buying an electric car, step by step

A company buys an electric car rated 17.2 kWh/100 km on its COC, with 150 kW of power.

1. Base price including VAT: €46,800.
2. Options including VAT (heat pump, tow bar, driver assistance pack): €4,700.
3. Dealer discount: €1,500.
4. Catalogue price for the benefit: 46,800 + 4,700 - 1,500 = €50,000.
5. Rate: 17.2 kWh/100 km is below 18, so 0.5 %.
6. Monthly benefit: €50,000 x 0.5 % = €250, or €3,000 a year.

Variant: the employee picks the all-wheel-drive version at 18.9 kWh/100 km and 220 kW, catalogue price after discount €54,000. Both tests fail: 18.9 is above 18, and although consumption is under 20 kWh/100 km, power is above 150 kW. The rate is therefore 0.6 %, a benefit of €54,000 x 0.6 % = €324 a month, €74 more than the base version. Over 4 years, the difference adds up to about €3,550 of taxable benefit.

Example 2: net cost by powertrain

Take a car with a catalogue price of €50,000 including VAT and options. For the employee's net cost, we use an illustrative combined marginal rate of 40 % (tax and social contributions). Your actual rate depends on your tax class and salary.

At the same price, the combustion car costs the employee about €300 more net per month than the electric one, or about €3,600 a year.

Example 3: marginal rate and salary level

How much the gap matters depends on the marginal rate. For an electric company car at 0.5 % and a combustion car at 2 %, both with a €50,000 catalogue price:

The higher the salary, the bigger the advantage. For managers on a high marginal rate, the electric company car is often the most valuable part of the package.

What the employer pays

The benefit is part of the remuneration subject to contributions. The employer pays its social contributions on it, in the order of 12 to 15 % depending on the risk class and the Mutualité class. A benefit four times lower means employer contributions four times lower on that line: for a €50,000 catalogue price, about €360 to €450 a year for the electric car, against about €1,440 to €1,800 for the combustion car.

To go beyond payroll and compare the full cost of each powertrain, see our article on fleet total cost of ownership.

Company car or pay rise: the employee's comparison

In salary negotiations, the question often comes up: is a company car worth more than a gross pay rise? A simplified comparison at a combined marginal rate of 40 %:

A comparable private car can easily cost a household €8,000 or more a year in lease, energy and insurance, more than a realistic pay rise brings in net. That is why the electric company car remains a strong retention tool in Luxembourg, especially for cross-border workers with long commutes. The condition is that the driver does not advance the cost of energy without being reimbursed correctly.

Flat rate or logbook: which is better?

The logbook replaces the flat rate with actual private use: private kilometres, including commuting, multiplied by the car's cost per kilometre. That cost includes every cost of the car (depreciation or lease, energy, maintenance, insurance, taxes), divided by total kilometres, and is established by the employer. The logbook must be kept every month and annexed to payroll.

A comparison with assumptions you should replace with your own figures: €50,000 catalogue price, 8,000 private km a year.

The conclusion is typical: for an electric car, the flat rate almost always beats the logbook, because 0.5 % is very low. For a combustion car at 2 %, the logbook can pay off when private mileage is low, at the price of effort and complete records. The logbook rules are explained in our article on the company car logbook.

The calendar: 2026, 2027 and the draft up to 2030

For orders in progress, what counts is the contract date and the registration date.

1. Contract signed by 31 December 2026, car registered by 31 December 2027: 0.5 % or 0.6 %, and the rate is kept as long as the contract is not changed.
2. After those dates, under the current text: electric rates for new contracts would rise to 1 %, 1 % and 1.2 %.
3. Under the draft Grand-Ducal regulation approved by the Government Council on 24 July 2026: 0.5 % and 0.6 % would be extended to contracts signed from 1 January 2027 to 31 December 2030 and registered by 31 December 2031, then 1 % and 1.2 % from 2031. Plug-in hybrids emitting 50 g CO2/km or less (WLTP) would drop from 2 % to 1 % from 2027 to 2030, then 1.5 % from 2031; above 50 g they stay at 2 %.

The period from 2027 is a draft until it is published in the Mémorial; the Klima-Agence also presents it subject to adoption. The hybrid measure is contested (Chamber of Employees, Mouvement écologique), and leased EV registrations fell by 31 % in 2025, which is the context of the draft. If you sign in early 2027, check the published text before telling an employee their rate. Sources: Klima-Agence, Paperjam, government revises leasing tax as electric vehicle sales slow, Paperjam, debate on hybrids.

What to anticipate now

• Orders before year end: a contract signed before 31 December 2026 secures 0.5 % or 0.6 % whatever happens to the draft, provided registration takes place by the end of 2027.
• Avoid contract amendments: a later change to the contract can put the secured rate at risk.
• Date your car policy: always state rates with the date of the legal position and a caveat for contracts from 2027.
• Do not rush plug-in hybrid orders: the 1 % rate depends on the draft and applies only up to 50 g CO2/km.
• Check existing cars: nothing changes for cars already registered as long as the contract is unchanged. A change of driver within the company does not change the car's contract and registration dates, which set the rate; a contract extension on new terms should be checked with your fiduciary first.

Plug-in hybrids: 2 % today, perhaps 1 % from 2027

Plug-in hybrids registered from 1 January 2025 are valued like combustion cars at 2 %, however often they are charged. They have had no purchase grant since 2022. The 2027-2030 draft would cut plug-in hybrids at 50 g CO2/km or less to 1 %, which the Chamber of Employees and environmental groups criticise: a hybrid running mostly on petrol emits far more than its homologation value shows.

For the car policy, this means: if you allow plug-in hybrids, organise and measure charging. Only a regularly charged hybrid fits the logic of a lower rate, and only measured kWh allow correct reimbursement of electricity. For payroll, the rate stays at 2 % until the regulation is published.

Employee contributions: what is deductible and what is not

Article 4 of the regulation is precise:

• fixed flat contribution paid by the employee: deducted from the benefit;
• contribution to the leasing cost: deductible up to 20 % of the employer's cost;
• contribution to the purchase price: depreciated and capped at 20 %;
• contribution to variable costs (fuel, maintenance, repairs): not deductible from the flat-rate benefit.

Example 1: an employee pays €100 a month to get a higher-spec electric car at 0.5 %, catalogue price €60,000. The gross benefit is €300 a month; after deducting the fixed contribution, €200 remains taxable.

Example 2, leasing: the lease costs the employer €800 a month, and the employee contributes €200. At most 20 % of €800, i.e. €160, is deductible. With a €300 benefit, €140 remains taxable; the other €40 of the contribution does not reduce the benefit.

A special case is salary sacrifice: when the car replaces part of the cash salary, article 7 of the regulation rules out the flat rate, and other costs borne by the employer are taxed at their actual value.

Company car electricity: inside the flat rate if reimbursed at real cost

This is the point most guides leave out. No law, regulation or ACD circular specifically addresses electricity charged at home.

In practice, under the Grand-Ducal regulation, a company car's electricity is a running cost covered by the flat-rate benefit, like fuel, provided the kWh actually charged into the car are reimbursed at their real cost. Two parts of the text support this reading: the flat rate replaces the calculation based on the car's full cost per kilometre (article 3), and employee contributions to fuel costs are not deductible (article 4), which assumes those costs are covered by the flat rate. Payroll practitioners mostly read the text the same way.

Conversely, any amount above real cost, or a monthly lump sum not backed by measurement, is in principle taxable salary. This reading is not an official ACD position: have it confirmed by your fiduciary before writing it into your car policy.

Three cases, three treatments

Charging a company car at the company site follows the same logic: it is the company car's energy. For free charging of an employee's private EV at work, however, we found no explicit exemption; do not treat it as tax-free without checking.

The right price: the marginal kWh

Reimbursing at real cost takes two figures: the kWh charged into the company car, and the price of one extra kWh in the employee's contract. In Luxembourg in 2026, that price is about €0.19 at night on a dual-rate offer (energy, Creos network fee of €0.051 per kWh, 8 % VAT), not the €0.26 average bill price that includes fixed charges. If charging pushes the household above its reference power, a surcharge of €0.0765 per kWh excluding VAT applies.

Voltaback measures those kWh for each driver and applies the real price of their contract. Voltaback relies on the home's MID-certified meter, not on a standalone cable meter. The possible methods are compared in our article on reimbursing charging costs, and the driver's side in our guide to home charging a company car.

A charger at the employee's home: an extra benefit?

When the employer provides a charger at the employee's home, payroll rightly asks whether this creates another benefit. No Luxembourg text addresses it explicitly. The common reading distinguishes two cases:

• The charger stays the employer's property and is used to charge the company car: it is then a work tool linked to the car, with no separate benefit.
• Ownership passes to the employee, immediately or on leaving without payment: its value is then in principle taxable salary.

This classification has low certainty, since neither the law nor the ACD has addressed it; have it confirmed by your fiduciary. The employer has no obligation to provide a charger. It is not needed to reimburse electricity anyway: what matters is measured kWh and the right price.

Cross-border workers: where is the benefit taxed?

About 49 % of employees in Luxembourg are cross-border workers. The flat rate applies to every employee of a Luxembourg employer, resident or not, with no residence condition.

The benefit follows the treaty rule for salaries: it is taxed in Luxembourg for days worked in Luxembourg. Residents of Belgium, Germany and France have a tolerance of 34 days a year worked outside Luxembourg (telework, training, travel); for Germany it rose from 19 to 34 days from 1 January 2024. Beyond that, the salary share for days worked in the country of residence becomes taxable there under that country's rules, including the matching share of the benefit. Source: KPMG Luxembourg, Luxembourg-Germany tax treaty.

Example: a cross-border worker with 45 days of telework

An employee living in Germany works 220 days a year, 45 of them from home. The 34-day threshold is exceeded. Under the prevailing reading of the treaty, all 45 days then become taxable in Germany, not only the 11 days above the threshold, although practitioners do not fully agree on this. The benefit follows: of €3,000 a year, about 45/220, i.e. just over €600, falls to Germany, where that share is treated under German law. For payroll: track days outside Luxembourg continuously and warn cross-border workers early about the threshold.

For social security, the employee stays insured in Luxembourg as long as telework in the country of residence remains below 50 % of working time, under the EU framework agreement on cross-border telework; from 25 %, the employer requests an A1 certificate. Tax and social security thresholds are therefore different.

Two practical points for cross-border workers:

• Belgian residents may drive a Luxembourg-registered company car without registering it in Belgium; the Luxembourg employment contract is the proof.
• For electricity, a cross-border worker charges at home at their own country's price: about €0.24 at night in Belgium on a dual-rate meter, €0.32 in Germany. A single Luxembourg price would under-reimburse them.

How payroll applies the benefit

Every month, the benefit appears on the payslip as a benefit in kind, taxed and subject to contributions, without any cash paid. In practice, often handled by a fiduciary in Luxembourg, payroll needs a clean master record for each car:

On top of this come the monthly variable items outside the benefit, first of all home charging reimbursement. It should appear as a separate line with quantity and price, so that an audit can see it matches real cost.

Benefit in kind, road tax and Klimabonus: what belongs where

Three rules with similar thresholds are often confused:

• Benefit in kind (employee's income tax): 0.5 % up to 18 kWh/100 km, or up to 20 kWh/100 km with at most 150 kW, otherwise 0.6 %.
• Klimabonus Mobilitéit (purchase grant): €6,000 up to 16 kWh/100 km, €3,000 up to 18 kWh/100 km, or up to 20 kWh/100 km with at most 150 kW; its extension beyond 30 June 2026 depends on bill no. 8725.
• Road tax (vehicle keeper): €30 a year for a zero-emission vehicle, CO2-based for combustion cars.

The grant does not reduce the catalogue price used for the benefit, and the road tax is usually paid by the employer as keeper. For the employee, only the benefit counts, month after month on the payslip. The company-side treatment (depreciation, leasing, VAT, road tax) is explained in our guide to electric company car taxation.

Common mistakes and points to check

• Net price instead of gross price as the base: the catalogue price includes VAT.
• Forgetting options ordered later or listed separately in the lease contract.
• Using the lease rental instead of the new price as the base.
• Using real consumption instead of the WLTP value for the 18 kWh/100 km threshold.
• Deducting variable cost contributions, such as a driver's contribution to electricity.
• Flat electricity reimbursement without measurement, which may exceed real cost.
• Not documenting contract dates, although they decide between 0.5 % and 1 %.
• Not tracking cross-border workers' telework days until the 34-day threshold is passed.

Checklist and what matters for your role

Before ordering

• Check WLTP consumption and power on the COC of the chosen configuration: 0.5 % or 0.6 %?
• Record the catalogue price with options and VAT, minus the discount.
• Sign before 31 December 2026 if possible, and follow the 2027-2030 draft.

Every month

• Report the benefit in payroll and deduct only allowed fixed contributions.
• Reimburse electricity at measured real cost, not a lump sum.
• For cross-border workers, track days worked outside Luxembourg.

For HR teams, our dedicated page shows how Voltaback simplifies payroll for home charging.

Voltaback: company car electricity measured and reimbursed at real cost

The benefit in kind takes one line to calculate. Home charging needs reliable measurement every month. Voltaback measures the kWh charged into each company car, values them at the real price of the driver's contract, resident or cross-border, and produces a monthly export ready to import into your payroll software. 100 % software with no box, more than 48 car brands connected, measurement audited by an independent third party (1.22 % relative error), ISO 27001 since 2 December 2025; the company never receives drivers' geolocation.

Discover home charging reimbursement or talk to our team.