Draft: Company Car Taxation – Upcoming Changes for Hybrid and Electric Vehicles

Background

The taxable benefit in kind arising from the private use of a company car is currently determined under the Grand-Ducal Regulation of 23 December 2016, as amended. The applicable percentage rates depend in particular on the vehicle’s engine type and CO2 emissions.

A draft amendment to this regulation has recently been published, focusing in particular on plug-in hybrid vehicles and fully electric vehicles.

Key Points

According to the draft, plug-in hybrid vehicles with CO₂ emissions of no more than 50 g/km are to benefit from more favourable tax treatment again: the rate used to calculate the benefit in kind is to be reduced from the current 2% to 1%. It should be noted that this preferential treatment is intended to apply only to vehicles that are first registered between 1 January 2027 and 31 December 2030 and are not subject to a contract concluded by 31 December 2026.

In addition, the preferential tax treatment for pure electric vehicles is to be extended. Under this regime, the monthly benefit in kind for the private use of a company car is generally calculated at 0.5% of the vehicle’s value when new (for electric vehicles that do not meet the applicable consumption or efficiency criteria, the rate is 0.6%). Under the current rules, this preferential treatment applies to vehicles ordered by 31 December 2026 and first registered by 31 December 2027. Under the proposed new rules, these deadlines are to be extended by four years, meaning that vehicles could be ordered by 31 December 2030 and first registered by 31 December 2031 while still benefiting from the preferential tax treatment.

Status

These changes remain at the draft stage. The provisions have not yet been formally adopted and have not been published in the Mémorial.

Practical Implications and Recommendation

We recommend factoring these anticipated changes into your planning when acquiring new company cars, particularly plug-in hybrid or electric models. As the amendment has not yet been finalized, the exact terms and timing of adoption should be monitored closely.

We are happy to support you in assessing how these developments apply to your specific situation and in determining the most advantageous timing for your next company car acquisition.

Please contact us to identify the most advantageous option for your situation.

As of 20 August 2026