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14.05.18 Cash for car finally at cruising speed

Employment
May 14

After a winding road, on 15 March 2018 the parliament finally adopted the Act on the introduction of a mobility allowance.  The measure aims to address the Belgian congestion problem by encouraging employees to hand in their company car and, with the compensation they receive, to look for alternative means of transport for their commuting. The law was published in the Belgian State Gazette on 7 May 2018.

Below we give a brief overview of the main principles of the mobility allowance:

What?

The mobility allowance introduces the possibility for employees to exchange their company car for a cash allowance, the fiscal and social treatment of which is competitive with that of the company car.

For whom?

For both the employer and the employee, certain conditions must be met in order to be able to make use of the measure.

The employer must have provided a company car to one or more employees for an uninterrupted period of at least 36 months.

Only employees who 1) at the time of the application, have had a company car with the current employer for at least 3 months without interruption and 2) have had a company car with the current employer for at least 12 months during the 36 months prior to the application can apply for such a mobility allowance.

With these conditions, the legislator wants to prevent employers from granting a company car for a short period of time and then replacing it with a tax and parafiscally advantageous allowance.

There are specific rules for starting employers and employees who also had a company car with their previous employer.

How?

Both employer and employee are completely free to decide whether or not to make use of the mobility allowance:

  • The introduction of the mobility allowance is the exclusive responsibility of the employer;
  • If the relevant legal conditions are met, the employee can ask the employer in writing to exchange his or her company car for a mobility allowance;
  • The employer then refuses or accepts the application in writing;
  • The formal request of the employee and the positive response of the employer to this request constitute an agreement that forms part of the content of the employment agreement between the parties. This written agreement is a social document and must specify, among other things, the base amount of the mobility allowance.

Consequences?

The payment of the mobility allowance will terminate the granting of the company car and the related advantages (e.g. winter tyres, insurance, navigation equipment, etc.) from the first day of the month in which the mobility allowance is granted.

The amount of the mobility allowance is based on the catalogue value of the company car and is as follows:

  • 20% of 6/7th of the catalogue value of the company car, possibly reduced by the personal contribution of the employee, if the employee did not have a fuel card;
  • 24% of 6/7th of the catalogue value of the company car, possibly reduced by the personal contribution of the employee, if the employee did have a fuel card. 

The granting of the mobility allowance cannot (in principle) be cumulated with the tax exemptions on commuting allowances. The employer's existing obligation to grant a commuting allowance ceases on the first day of the month in which the mobility allowance is granted.

(Para)fiscal treatment?

The (para)fiscal regime of the mobility allowance can be summarised as follows:

  • On behalf of the employee:
    • No personal social security contributions;
    • Taxable as a benefit in kind, where the taxable benefit on an annual basis is equal to 4% of 6/7th of the catalogue value of the company car, possibly reduced by the personal contribution of the employee.
  • On behalf of the employer:
    • No employer social security contributions, but a special solidarity contribution equal to the last applicable amount of the CO2 contribution of the exchanged vehicle;
    • Mobility allowance deductible in the amount of 75%, with a transitional arrangement for the first years after the company car has been exchanged.

Entry into force?

The Act will enter into force retroactively on 1 January 2018.

Employment, Pensions & Benefits