• Mobility budget and mobility allowance finally approved!

Mobility budget and mobility allowance finally approved!

01 March 2019

We had to wait longer than initially expected and there were some doubts about the actual enactment, but on Thursday 28 February 2019 the law on the mobility budget was finally approved. The new legislation will soon be published in the Belgian Official Gazette and it will enter into force on 1 March 2019.

Not only the mobility budget was approved, the existing mobility allowance (also known as ‘cash for car’ regulation) was also clarified on some points and aligned with the regulation of the mobility budget.

Here’s an overview of the highlights of the new mobility budget and the changes made to the mobility allowance scheme.

 

Mobility budget

 

What does the mobility budget stand for?

The mobility budget gives employees the opportunity to exchange their company car for a certain budget. The employee can spend this budget based on the following 3 pillars.

 

Pillar 1 - A more environmentally sustainable company car

Via the mobility budget the employee can choose to keep the company car but will have to switch to a more environment-friendly model.

 

Pillar 2 - Sustainable means of transport

The employee can spend the balance of his budget on sustainable means of transport. This pillar offers a wide range of possibilities. For example, the employee can take a subscription to public transportation, but he can also use the outstanding budget for the purchase, the maintenance and equipment of a(n) (electric) bike, hoverboard or electric step.

The employee can even choose to purchase individual tickets for public transport for someone else (e.g. family member) to avoid using the company car for a family trip during the weekend.

The cost of a company bike or bike allowance can also be covered with this budget, as well as the employee’s housing costs, provided that the place of residence is located within a radius of 5 km from the place of employment. Living close to work is therefore also considered to be a mobility solution.

 

Pillar 3 – Balance in cash

Any outstanding budget at the end of the year will be paid out to the employee, subject to a 38.07% single social security contribution.

The mobility budget is a voluntary scheme, both for the employer and the employee. The initiative for introducing the scheme will, however, always be taken by the employer.

 

Calculation of the mobility budget

The mobility budget is determined on the basis of the total cost of the company car, the so-called ‘total cost of ownership’. This includes a.o. the CO² contribution, fuel costs, non-deductible VAT, and other costs such as winter tires and insurances not included in the lease price.

The law does not provide for an automatic indexation of the mobility budget. However, the mobility budget may be subject to a different method of adjustment, if this is provided for by the employer’s policy. In that case, this alternative adjustment may not result in a higher mobility budget than the one obtained if the mobility budget had been indexed according to the wage index.

The mobility budget can also be increased or reduced in the event of a position change or a promotion if, due to that change or promotion, the employee transits to a job category for which the car policy provides for a higher or lower category of company car.

The allocation of a mobility budget will end in the case the employee is transferred to a position which does not give right to a company car according to the employer's car policy.

 

Who can introduce the mobility budget?

Employers can introduce the mobility budget only if they made one or more company cars available to one or more employees for an uninterrupted period of at least 36 months immediately prior to the introduction of the mobility budget.

To qualify for the mobility budget, the employee must have had a company car or have been entitled to a company car for at least 12 months during the past 36 months, of which 3 months uninterruptedly prior to his application.

These conditions do not apply to newly hired employees, nor to employees who have been promoted or changed positions before the law enters into force.

 

Social and tax treatment

The actual (para)fiscal treatment of the mobility budget will depend on how the employee spends his budget.

If the employee exchanges his company car for a more environment-friendly car (pillar 1), the (para)fiscal treatment for company cars will remain applicable. However, the taxable benefit in kind and the special CO² social security contribution can be expected to be lower than than it is for the previous vehicle.

The budget spent in pillar 2 is entirely exempt from tax and social security contributions. So this results in a full optimisation

The balance paid out in cash (pillar 3) is subject to a 38.07% (25% + 13.07%) social security contribution. This contribution is entirely at the expense of the employee. There is no additional cost for the employer.

 

Mobility allowance

Under the mobility allowance scheme, the employee exchanges his company car for a payment in cash, the so-called cash-for-car scheme. In this scheme, the employee cannot opt for another, environment-friendly company car.

The mobility allowance scheme took effect as of 1 January 2018. Even though, in practice, the allowance does not seem to be very popular up to now (i.e. 320 applications in 2018), the first changes to the law are already being submitted.

The aim of the changes is to align the existing regulation of the mobility allowance with the new regulation of the mobility budget. Moreover, several ambiguities in the law need clarification.

 

Extension of the scope of application

First of all, the scope of application of the mobility allowance has been extended. The mobility allowance, therefore, is no longer limited to employees who have effectively had a company car for at least 12 months in the past 36 months, of which 3 months immediately prior to the application.

In line with the mobility budget, the mobility allowance is now also available to employees who have not actually had a company car, but who have been entitled to one under the company’s car policy, for the same period of time.

This condition no longer applies when hiring new employees, in line with the mobility budget. New employees who are entitled to a company car according to the car policy can immediately receive a mobility allowance, without first having to drive the car for 12 months.

As a result of this change, the period during which the employee has had a company car at his previous job, becomes irrelevant. The recently introduced company car certificate is therefore no longer useful.

Finally, the condition of continuation also does not apply to the situation of a promotion or job change that already took place before the law came into force.

 

Dynamic mobility allowance

Initially, the amount of the mobility allowance was set to be invariable. The amount was determined at the moment the employee exchanged his company car and could not be adjusted in the future.  Only an annual indexation of the mobility allowance was provided for.

This is now changing. The mobility allowance will increase or decrease in case of a change in position or promotion, for which the employee would be entitled to a company car of a higher or lower category.

This adjustment also makes the regulation of the mobility allowance scheme consistent with that of the mobility budget. The latter will also evolve when the employee transits to another function within the company for which a different category of company car is offered.

 

Combination mobility allowance and commuting allowance

The law also clarifies that the combination of the mobility allowance and the commuting allowance is not possible, except in cases where the employee could previously benefit from the combination of company car and employer's intervention.

 

Deduction of employee contribution

If the employee pays a personal contribution for the use of the company car, this personal contribution may be deducted from the mobility allowance.

The law now clearly stipulates that this personal contribution may also be deducted from the taxable benefit that is linked to the mobility allowance.

 

Modalities for the calculation of the mobility allowance

Once the employee applies for the mobility allowance, the employer will now be obliged to inform the employee in advance of the modalities for the calculation of the allowance, as well as of the exact amount. This amount and the calculation method must be included in the agreement between employer and employee.

 

Fine-tuning anti-abuse provision

One of the relevant anti-abuse provisions is becoming more flexible. For example, the mobility allowance may not be granted in exchange for salary or other acquired benefits, with the exception of the company car itself or the salary and any other benefits received in exchange for the company car, as stipulated in the individual employment contract.

Consequently, employees who already received a compensation in gross salary in the past for renouncing to their entitlement to a company car, can now exchange that compensation for a mobility allowance.

 

Transition from mobility allowance to mobility budget

Employees making use of the mobility allowance will lose their entitlement to the allowance when transitioning to a mobility budget, and vice versa.

 

Entry into force

The new mobility budget and adjustments to the mobility allowance take effect on 1 March 2019. The clarifications to the mobility allowance will take effect retroactively from 1 January 2018.

 

Contact

Shoud you have any questions regarding this topic or would like to be assisted by one of our experts, please do not hesitate to contact the BDO Legal team: