Electric company car tax in Luxembourg in 2026: VAT, benefit in kind, grants and road tax

In Luxembourg, an electric company car is taxed far more lightly than a combustion car: a benefit in kind of 0.5 % or 0.6 % of the list price per month instead of 2 %, road tax of only €30 a year, and a Klimabonus Mobilitéit purchase grant of up to €6,000, depending on the contract date. VAT on the car follows the general rules, with one sticking point: making the car available to employees.

This article gives finance teams a one-page overview: comparison table, benefit in kind by list price, social contributions, cross-border rules, VAT, road tax, grant, depreciation, plug-in hybrids, the 2026-2030 calendar, chargers on company premises, a worked EV against diesel case at €40,000 and an eight-point checklist. It ends with the line many forget: home charging, which Voltaback reimburses at real cost for more than 200 client companies.

Overview: electric, plug-in hybrid and combustion in 2026

The electric car wins mainly on two lines: the benefit in kind, which weighs on payroll every month, and the purchase grant. VAT and depreciation do not distinguish between powertrains.

Benefit in kind: 0.5 % or 0.6 % instead of 2 %

This is the main lever. An EV with WLTP consumption of no more than 18 kWh/100 km (or 20 kWh with no more than 150 kW) is valued at 0.5 % of the list price per month, other EVs at 0.6 %, and combustion cars and hybrids registered since 2025 at 2 %. These rates apply to contracts signed by 31 December 2026 and registered by the end of 2027; a draft regulation would extend them to 2030.

The base is the list price of the new car including options and VAT, less any discount granted. It also applies to leased and used cars. Whether 0.5 % or 0.6 % applies depends on the WLTP consumption on the certificate of conformity (COC), not on real-world consumption.

What this means by list price

The gap between 0.5 % and 0.6 % is small; the gap between electric and combustion is large. For the car policy, an efficient EV below 18 kWh/100 km pays twice, because besides the lower rate it can also reach the higher Klimabonus tier.

The conditions, 2027 calendar and special cases are covered in our article on company car benefit in kind in Luxembourg. Source: Klima-Agence, benefits in kind for company cars.

Social contributions follow the benefit in kind

The benefit in kind is part of gross salary. It bears income tax and social contributions, collected through the Centre commun de la sécurité sociale (CCSS), on both the employee and the employer side. A lower benefit in kind therefore reduces both burdens, as the worked case below shows.

Employee contributions: what reduces the benefit and what does not

Some employers ask drivers to contribute to the car. The Grand-Ducal regulation of 23 December 2016 sets which contributions reduce the taxable benefit:

• a fixed flat contribution paid by the employee is deducted from the benefit;
• a contribution to the leasing cost is deductible up to 20 % of the employer's cost;
• a contribution to the purchase price is spread over the depreciation period, also capped at 20 %;
• contributions to variable costs (fuel, servicing, repairs) are not deductible from the flat-rate value.

The last rule matters for EVs: asking a driver to pay part of their charging does not reduce their taxable benefit. It simply shifts a car cost onto them. Source: Chamber of Commerce, coordinated text of the regulation of 23 December 2016.

Cross-border workers: taxed in Luxembourg, within limits

The flat rates apply to every employee of a Luxembourg employer, wherever they live. The benefit in kind is taxed in Luxembourg like salary, for the days worked in Luxembourg. Above 34 working days a year outside Luxembourg (threshold agreed with Belgium, Germany and France), the share for those days may become taxable in the country of residence.

A practical point for Belgian residents: they can drive a company car registered in Luxembourg without registering it in Belgium, provided they can show their Luxembourg employment contract. Source: Guichet.lu, road tax exemption for Belgian residents.

VAT recovery on an electric company car

The principle: deductible if the car serves the taxable business

VAT paid on buying or leasing a car is deductible to the extent the car is used for an economic activity that gives a right to deduct. Guichet.lu presents buying a car as a case where VAT, at the standard 17 % rate, is often fully recoverable. There is no VAT regime specific to electric cars: the same rule applies to every powertrain. Source: Guichet.lu, purchase or lease of fixed assets.

Companies whose activity is largely VAT-exempt, such as many in the financial sector, recover little or no input VAT. For them, the 17 % on the car or the lease payments is a real cost, which makes the price gap between models count more.

Providing cars to employees: circular 807-1

The difficulty lies in private use. The VAT authority (Administration de l'enregistrement, des domaines et de la TVA, AED) set out its position in circular no. 807-1 of 21 October 2025, which implements the QM judgment of the Court of Justice of the European Union.

• Free provision: if VAT on the car was deducted, the employee's private use must be subjected to VAT in Luxembourg.
• Provision against consideration: this is the case when the employee pays the employer, part of their cash salary is withheld, they give up other benefits for the car, or they have a "car budget". The employer then makes a taxable rental of a means of transport.
• Taxable base of that rental: at least the lease payment the employer pays or, for a purchased car, depreciation over 5 years, plus the other costs borne. Business use may not be deducted from it.

Source: AED, circular no. 807-1 of 21 October 2025.

The cross-border trap

For a long-term rental to an employee living in another Member State, VAT is due in the employee's country of residence. A Luxembourg employer providing a car against consideration to a Belgian, German or French cross-border worker must apply that country's VAT, through the One-Stop Shop (OSS). With almost half of employees commuting from abroad, this concerns many companies. Have your treatment checked by your fiduciary.

What about electricity?

Electricity charged on company premises and invoiced to the company bears 8 % VAT, deductible under the general rules. Electricity charged at the employee's home is billed in the employee's name: the company that reimburses it has no input VAT to recover. What matters then is that the reimbursement matches the real cost.

Road tax: €30 for electric cars

Zero-emission vehicles pay the minimum tax of €30 a year. For combustion cars first registered from 2001, the tax is calculated on the CO2 emissions shown on the certificate of conformity, using the tables of the Customs and Excise Agency: the amount rises progressively with emissions, and diesels are taxed with a higher factor than petrol cars. The tax is collected each year through a vignette.

Compared with the benefit in kind, the gap per car is moderate. But it is a fixed line that adds up across the fleet year after year and becomes noticeable at high emissions. Sources: ACEA, tax benefits for electric cars 2026; Guichet.lu, motor vehicle tax.

Vehicle taxation and its impact on a fleet are covered in our article on road tax for electric vehicles.

Klimabonus Mobilitéit: the purchase grant for companies

Legal persons can receive the grant for a new fully electric or hydrogen passenger car:

The grant is capped at 50 % of the cost excluding VAT. The car must be kept for 36 months after registration. With a lease, the lessee can receive the grant if the owner waives it and the car is registered in Luxembourg.

Watch the calendar. The current scheme covers contracts signed from 1 October 2024 to 30 June 2026. Bill no. 8725 extends it to contracts from 1 July 2026 to 30 June 2030 with unchanged amounts, but it had not yet been voted at our last check. For a contract signed since July 2026, the grant therefore depends on its adoption. Sources: Guichet.lu, grant for electric vehicles (legal persons), gouvernement.lu, Klimabonus Mobilitéit.

Depreciation and leasing

A car bought by the company is depreciated, and the depreciation charge reduces taxable profit. With an operating lease, where the lessee is not the tax owner of the car, lease payments are fully deductible. With a finance lease where the company is the tax owner, only the interest is deductible and the company depreciates the car. Source: Guichet.lu, purchase or lease of fixed assets.

We found no car-specific depreciation ceiling in the official Luxembourg sources we checked; the useful life is set by the company with its fiduciary. Details are in our article on company vehicle depreciation, and the buy or lease choice in our article on electric car leasing tax.

Plug-in hybrids: what they have lost

For Luxembourg tax purposes, a plug-in hybrid is no longer half an electric car:

• 2 % benefit in kind when registered from 1 January 2025, like a combustion car;
• no Klimabonus since 2022;
• road tax based on CO2 emissions.

The July 2026 draft regulation would cut the benefit in kind to 1 % for hybrids emitting 50 g CO2/km or less from 2027 to 2030. It is a contested draft, and even if adopted the rate would still be twice the electric one. Source: Paperjam, debate on hybrids.

Calendar 2026 to 2030: the deadlines that count

For finance teams, the calendar matters almost as much as the rates. Several rules expire in 2026 or depend on drafts that had not been adopted at our last check.

What this means for your orders:

• Cars due for replacement in 2027 anyway: signing the contract in 2026 locks in today's rate, even if delivery only happens in 2027, as long as the car is registered by the end of 2027 and the contract stays unchanged.
• Contract changes: if a contract is materially changed after 2026, the rate may have to be reassessed. Keep changes minimal and documented.
• Drafts: budget on the law in force and treat the drafts as a possible improvement, not as the basis of the budget.

Source: ACD, newsletter of 10 January 2025.

Chargers on company premises: tax treatment

A charger in the company car park is a fixed asset like any other technical equipment:

• VAT: 17 % on the charger and installation, deductible under the general rules if the company has a right to deduct.
• Depreciation: over the useful life set with the fiduciary.
• Grants: separate business schemes with calls for projects exist, distinct from the Klimabonus for private individuals. Check the current call before ordering.
• Employees charging their private EVs: we found no explicit exemption for Luxembourg like those in some other countries. In principle, free electricity for a private car is a benefit. Clarify the treatment with your fiduciary before offering free charging.

For company cars, things are simpler: electricity charged on company premises is a running cost of the car, like fuel at the pump.

Electric cars that are not company cars

When an employee uses their own car for business trips, the employer can pay a mileage allowance, usually €0.30 per km in Luxembourg, whatever the powertrain. The company car rules above do not apply: the employer does not pay the running costs of a private car, and paying a private EV's electricity would be taxable salary. Keep the two regimes clearly apart in the car policy.

Worked case: electric against diesel at €40,000 over one year

Assumptions: list price of €40,000 including VAT and options for both cars, contract signed in 2026, private use. Employer contribution rate 13 % (order of magnitude, depending on the company's risk class and Mutualité). Employee's combined marginal rate 40 % (tax and contributions, as an example).

Over one year, the electric car saves the company almost €1,000 and the employee almost €2,900, before road tax and any grant. Across 50 cars, the company-side gap exceeds €46,000 a year. To steer the switch across the whole fleet, see our article on fleet electrification.

Checklist for finance teams

Before you approve the next order round, check these eight points:

1. WLTP consumption of each model in the car policy: below 16, 18 or 20 kWh/100 km? The benefit rate and the grant tier depend on it.
2. Motor power for models between 18 and 20 kWh/100 km: no more than 150 kW for 0.5 %.
3. Contract date and registration: signed by 31 December 2026, registered by 31 December 2027.
4. Klimabonus: does the contract date fall in a grant window? Does the leasing company waive the grant in the company's favour? Is the 36-month holding period planned?
5. VAT on the provision: free or against consideration? For cross-border workers with consideration: VAT of the country of residence through the OSS.
6. Employee contributions: correctly handled in payroll, within the 20 % limit?
7. Cross-border days: are working days outside Luxembourg recorded so the 34-day threshold is monitored?
8. Home charging: is there a rule in the car policy, and is it reimbursed at real cost, with evidence?

The last point is the only one that comes back every month. It deserves its own section.

The forgotten line: home charging

Once the benefit in kind, VAT and grant are optimised, one question is rarely asked at the time of ordering: how do you correctly reimburse the electricity charged at the employee's home?

Luxembourg has no official flat rate per kWh. Under the Grand-Ducal regulation of 23 December 2016, the electricity of a company car is in practice a running cost covered by the flat-rate benefit in kind, provided the kWh actually charged are reimbursed at their real cost. A lump sum above that cost is in principle salary. This reading is not an official ACD position: have it confirmed by your fiduciary.

Real cost differs from one employee to the next: about €0.19 per kWh at night in Luxembourg on a dual-rate offer, €0.24 in Belgium on a dual-rate meter, €0.32 in Germany. For a car using 18 kWh/100 km and charging for 15,000 km a year at home, that is about €513 a year for a resident and up to €864 for a cross-border worker living in Germany. Estimate your fleet's budget with our home charging cost simulator.

Voltaback measures the kWh charged into each company car and applies the real price of each driver's contract. Voltaback relies on the home's MID-certified meter, not on a standalone cable meter.

Voltaback: the last line of electric car taxation under control

Voltaback reimburses home charging for your company cars at real cost, for residents and cross-border workers alike, with a monthly export ready to import into your payroll software. 100 % software, more than 48 connected brands, measurement audited by an independent third party (1.22 % relative error), ISO 27001 certified since 2 December 2025 and GDPR compliant; the company never receives drivers' geolocation.

Discover home charging reimbursement or talk to our team to model your fleet.