Mobility allowance (a.k.a. “Cash for Car”) and Mobility budget

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The Belgian government agreed on the introduction of a so-called ‘mobility budget’. This will be an additional measure aimed to reduce Belgian traffic congestion and support eco-friendly commuting next to the ‘mobility allowance’, also known as ‘cash for car’. The latter has been approved in Parliament earlier this month. The draft law for the mobility budget is not yet available, only the basic principles and guidelines are known yet.

In view of the new measurements to encourage more eco-friendly commuting to the detriment of the company car, we would like to highlight the differences between both systems.

1. Who is eligible?

Cash for car

Employers who offer their employees a company car for at least 36 months. The employee should have had a company car for at least 12 months during the past 36 months, with a minimum of 3 months prior to the cash for car request. The employer has the right to refuse an employee’s request.

Mobility budget

Employers who have a company car policy in their organization for at least 36 months.

Important to note is that the employer is not obliged to implement one of these new measures, nor is the employee required to opt for it when made available.

2. Main differences between both regimes?

Cash for car

Within the mobility allowance regime the employee hands in his company car (including related benefits) in exchange for cash. The cash amount will be determined based on the following rules :

  • Catalogue value of the company car X 6/7 X 20% (in case no fuel card was available)
  • Catalogue value of the company car X 6/7 X 24% (in case a fuel card was available)

A pro rata of the own contribution (if applicable), will be deducted from the mobility allowance.

Mobility budget

In this system, the employees ‘having’ a company car receive a budget to compose their own mobility package over 3 pillars. Contrary to the mobility allowance, the mobility budget will not be determined based on the catalogue value of the car to which they are entitled but its total cost of ownership for the employer.

Pillar

1

The employee who has a company car at his disposal downgrades his current company car to a 'smaller' and a 'more ecological' one. Employees who do not yet have a car but are 'entitled' to one, can choose one for this 'lower' category.

Pillar

2

The released funds following the downgrade in pillar 1 can be used for sustainable transportation options (e.g. bike, public transport, car sharing platforms ...)

Pillar

3

The budget remaining (if any) after pillar 1 & 2 will be paid in cash at yearend.

3. Taxation (individuals) of both regimes

Cash for car

The employee’s mobility allowance will not be taxed as regular salary but will be considered as a taxable benefit in kind based on the following formula :

  • Catalogue value of the company car X 6/7 X 4%

The resulting benefit in kind will be taxed at progressive rates, comparable with the taxation of the former company car. As per the former company car, a minimum taxable benefit in kind of EUR 1.310 will be applicable (income year 2018). No employee social security contributions are due.

Mobility budget

The more ecological company car chosen in pillar 1 will follow the regular company car treatment (in terms of individual – and corporate taxation).

The sustainable means of transportation in pillar 2 will be tax exempted for the employee and 100% deductible for the employer.

The remaining budget in pillar 3 (if any) will be paid out in cash, solely subject to employee (13,07%) and employer (25%) social security contributions. For every EUR 100 of residual budget, the employee will finally receive EUR 61,93 net in hand.

4. Practical example

Company car à

à Cash for car

à Mobility budget

BMW 2 series + fuel card
Diesel CO2: 108g/km
Catalogue value: € 31.000
Annual TCO : € 13.700

Annual mobility allowance
€ 6.377

BMW 1 series + fuel card
Diesel CO2: 99g/km
Catalogue value: € 26.000
Annual TCO : € 11.520

Pillar 1

/

/

12 months train subscription
€ 850

Pillar 2

/

/

Residual budget
€ 1.330

Pillar 3

Annual benefit in kind
€ 2.046

Annual benefit in kind
€ 1.063
minimum of € 1.310

Annual benefit in kind
€ 1.515

Annual taxation
€ 1.023
(estimated avg. rate 50%)

Annual taxation
€ 655
(estimated avg. rate 50%)

Annual taxation
€ 757
(estimated avg. rate 50%)

/

Final net in hand
€ 5.722

Residual net in hand
€ 857

5. Conclusion

Through the Mobility Budget, the Belgian government is willing to implement a second measure to ‘reduce traffic congestion’ and to ‘promote ecological alternatives’ for the company car. A preliminary draft of law still needs to be published and evaluated before the mobility budget can be implemented in practice. Unfortunately, many questions will need to be clarified in the near future in order to enable employers to start working on their mobility program based on both legal initiatives. Updates will be shared later.

However, both the final cash for car regime as well as the upcoming mobility budget will definitely raise many theoretical and practical questions and generate a complex administration. Regardless of the ambition of the government, the forecasted measures will not contribute in achieving the aimed objectives.

A custom made and overall mobility plan by each employer, not limited to company cars, but including all types of transportation, location specific, designed for each individual, dealing with all other constraints such as parking, teleworking and cultural aspects and last but not least total cost versus total net value, has already a solid and proven track record.

We strongly believe that this strategic rethinking of your mobility approach should be supported by intelligent data analytics providing you with in depth insights in view of your well thought decision making process.

Learn more on how EY is able to assist you with designing and implementing a future proof mobility solution for both employer and their employees.

Feel free to contact cash4car@be.ey.com our someone of our People Advisory Services team to get things moving…