14 sep 18

Mobility Allowance or Budget ? Belgium offers two choices

In order to reduce traffic congestion and for environmental reasons, the Belgian government recently launched two solutions to replace the company car, a very popular benefit amongst Belgian employees. One of them merely has any success, the second has more potential.


Mobility Allowance


The so called Mobility Allowance or “cash for car”was the first to be launched. It allows employees with a company car to exchange their car for an advantageously taxed amount of money. “Cash for car” is only possible if the employee as well as the employer agree to it, and if the employee has been in possession of a company car for a certain time. The amount provided by the employer as an alternative to the car is 20% of 6/7 of the car’s fiscal list price. For those with a fuel card, the percentage rises to 24%. Handing in an Audi A3 with a list price of 31.000 € and a fuel card would mean that the employee gets 6.376 € before taxes, which after taxation (on 4% of 6/7 of the list price) means a net monthly allowance of 487 €.


Of course, once an employee has traded his company car for cash, he will in most cases still need a personal vehicle, which often will be a second hand one, stuck in the exact same traffic jams as the former company car. And how much of that allowance will be available after paying all car costs? Apparently, only very little employees and employers believe in this option, and the Mobility Allowance is all but popular.


Because of that limited success, the Belgian government now plans to enlarge the eligibility for the Mobility Allowance to those employees that are entitled to a company car but do not have one for the moment. Whether this will make a big difference? Rather unlikely…


Mobility Budget


With the Mobility Budget, real change could be possible. This second option should be available as from the 1stof October 2018 and goes way further than the “cash for car”-option. Here too, both the employer and the employee have to agree on the principle before it can be put into place.


The budget paid by the employer is an amount that can be used freely by the eligible employee to pay for his mobility. To determine the amount, not only the list price, but the total cost of the company car is taken into account. That cost, including taxes, maintenance and repairs, tyres, depreciation and fuel, serves as the budget, which than can be used for the employee’s mobility. With it, he could still opt for a car, but it must be an eco-friendly one, but the real goal is that the amount would be spent on public transport, a bicycle, car sharing programs and other alternative means of transport, in order to reduce congestion and pollution.


Taxation-wise, the part of the budget that is not used for an alternative company car is exempt from tax and social contributions. If the budget is not fully spent at the end of the year, the rest is paid in cash, with only 38% of social security contribution but no income taxes. In reality, 62% of what is left of the budget will be paid as net salary.


The Mobility Budget could be more successful than the Mobility Allowance, although it will only be really interesting for those who can do without a car. Because for those who don’t, not much will be left of the budget once they have chosen a (more eco-friendly) company car as an alternative to the former one. And once more, that car will be in the same traffic jams…


Photo: The Mobility Allowance for an Audi A3 with a 31.000 € list price would be 487 €.

Photo credit: Audi Press

Authored by: Stijn Blanckaert