Belgian Mobility Budget and Mobility Allowance explained
In an attempt to move employees away from using company cars, the Belgian federal government has recently taken 2 initiatives. The first is the so-called “Mobility Allowance”, also known as Cash for Car, which is effective since March 2018 and has up till now known little success, the second one is the soon to be launched Mobility Budget, which is ready for submission to parliament and seems more interesting for eligible employees.
Mobility Allowance (“Cash for Car”)
In this initiative, a monthly cash amount is paid by the employer, as a compensation for the full trade-in of the company car. It is an opt-in formula that has to be the free choice of both parties.
The employee who wishes to trade in his car for cash must have had a car for at least 12 months during the past 3 years, of which 3 months uninterruptedly before the application for the allowance. At the same time, the employer must have a system of company cars in place for at least 3 years. The formula only applies to employees.
The yearly amount corresponds to 17.14% (if no fuel card included) or 20.57% (if fuel card included) of the list price of the car.
A benefit of kind is levied at 4% of 6/7 of the car’s list price and the employer pays the same social security contribution as for the current company car. Logically, no other commuting allowances can be paid in addition.
The allowance can be spent freely by the employee.
In practice, the net amounts in this case are not high enough for most users to persuade them to trade in their car.
The second option should become effective as of 1 January 2019.
It is to be seen as an alternative for, or an addition to the company car, and can not be combined with the cash for car option for the same employee.
Here as well, none of the parties can be obliged to accept it. In order to be eligible, the employee must have had a company car for at least 12 months during the past 3 years, of which 3 months uninterruptedly before the application. When starting in a new job in which a car is part of the salary package, this condition does not apply. The employer must also have had company cars in place for at least 3 years. As is the case for the Cash for Car-option, it is for employees only and does not apply to self-employed staff members.
The yearly budget amount should equal the total cost of ownership of the company car, all costs included (fuel, insurance, maintenance, taxes,…), and the employee can use the amount on any combination of 3 types of expenses.
The first option is an environmentally friendly company car, complying with the latest Euro norm and emitting a maximum of 95 grams per km CO2. Tax-wise, that car is treated as any other company car. A serious handicap to that first possibility is the fact that less than 5% of the current cars on offer meet these criteria, including zero emission vehicles. In addition, the emissions of the new car cannot exceed those of the current company car.
As a second option, the amount can be spent on alternative and sustainable modes of transport – fully untaxed. Some of the items that are included in this option are renting vehicles (up to 30 days per year), soft mobility (purchase and maintenance of bicycles, motorised bicycles, mopeds and electric motorcycles), public transport, organised common transport, shared solutions (carpooling, car sharing, sharing bikes, shared scooters ...), housing costs within a radius of 5km from the normal place of employment (rental fees and Interests on loans), or for bicycle allowances for work commuting and provision of a bicycle by the employer.
As a third option, the possible cash balance will be paid to the employee at the end of the year, without income tax but only a social security tax of 38,07%.
This second option could be more successful, but it remains to be seen whether employees are ready to trade in their current car.