According to several EU studies, Belgium is Europe’s most congested country in terms of hours wasted in traffic and delays. This is partially due to the fact that Belgium boosts a very large company car fleet because of tax incentives for employers to include such company cars in their employee’s remuneration package. The country recently introduced new solutions aiming at lowering the number of company cars.
1. Cash for car & Mobility budget
Two alternatives for company cars, which co-exist, can now be implemented by employers:
(i) Cash for car – previously introduced with effect from 1 January 2018
The so-called Cash for Car system allows employees to convert the company car (or the eligibility thereto) into a cash allowance benefiting from similar favourable tax and social security treatment.The amount of the cash allowance that employees are entitled to as compensation for handing in their (eligibility to a) company car is equal to a certain percentage of the value of the car (around 20%).
(ii) Mobility budget – now introduced with effect from 1 March 2019
The new measure allows employees to exchange their (eligibility to a) company car for a Mobility budget that is equal to the annual gross employer’s cost of their company car.
Whilst the Cash for Car system requires employees to choose between either a company car or cash, the Mobility Budget allows employees to spend their budget on three possible alternative mobility solutions:
- a more environmentally friendly car (e.g. an electric or hybrid car or a vehicle with low CO2 emissions), subject to the same tax and social security treatment as a regular company car;
- alternative and sustainable modes of transportation (e.g. public transport, bicycles, electric scooters, organised shared transport, monowheels, etc.), entirely exempt from taxes and the cost of which is fully deductible for the employer; and
- the remaining balance of the budget can be paid out in a cash amount that is subject to regular social contributions but that is tax-exempt.
Employees living close to their working place (i.e. within a radius of 5 kilometers) and who walk to work can use the Mobility Budget to pay the rent or the interests that are due on the mortgage of their home.
2. Conditions for Cash for Car and for Mobility Budget are aligned
Employees whose employer has introduced a Cash for Car and/or a Mobility Budget system who wish to make use of these options made available by their employer, must file a request to their employer in writing. Employers are entitled to accept or refuse this request (for example if the company car is considered key for the performance of the employee’s function).
To make use of the Cash for Car system or the Mobility Budget, Belgian law mainly requires that:
- the employer had offered company cars to one or more of its employees for a period of at least 36 consecutive months immediately preceding the introduction of resp. the Cash for Car system and the Mobility Budget;
- the requesting employee had been offered a company car for a period of at least 3 consecutive months immediately preceding the request to make use of resp. the Cash for Car system and the Mobility Budget or was eligible to a company car during that time; and
- in the period of 36 consecutive months preceding the request to make use of resp. the Cash for Car system and the Mobility Budget, the requesting employee had been offered a company car for at least 12 months or was eligible to a company car during that time.
These conditions slightly differ for recently registered employers who, as a result, are unable to meet the condition of having offered company cars to their employees for at least 36 consecutive months, as well as for recently hired employees.
Employers can make the Cash for Car system and the Mobility Budget subject to additional conditions, but have to inform their employees of these additional conditions upfront.
Since its entry into force on 1 January 2018, the Cash for Car system has not yet been successful, but expectations are that the Mobility Budget will be a more appealing alternative for employees. Watch this space!