Cash for company car from 2018?
The mobility budget based on the ‘cash for cars’ principle comes into effect on 1 January 2018. The Michel government is introducing the scheme as a way of reducing the number of company cars on the road. At the end of last year, SD Worx reported that 17% of Belgian employees have a company car. Some feel that they are one of the main causes of congestion in Belgium.
Why do we continue to opt for company cars?
There are many reasons why we often continue to opt for company cars. First, the job market is increasingly competitive and employers try to tie down employees by offering them one. Second, those who have a company car do not want to lose it and they demand one when they change employer. But the most important reason is the favorable tax regime. A company car is more advantageous than a pay rise for both employers and employees.
The government has launched the mobility budget as an alternative to attractive company cars. Basically, from 2018 employees who have a company car can give it up in exchange for an extra net payment. The measure has attracted a lot of criticism. In reality, it is not really a mobility budget. It is a way of optimizing employee pay for tax purposes.
‘Cash for cars’ introduction and who is eligible
The mobility budget is based on freedom of choice in two ways.
Employers decide whether or not to allow their employees to give up their company car in exchange for extra cash. And employees are free to accept or decline the offer. The mobility budget is only available to employers who have offered company cars to their employees for more than three years. There is a different scheme for start-ups.
Only employees who have had a company car for at least twelve months over the past three years have the option of trading in their company car for cash. Furthermore, this must include an uninterrupted period of at least three months before the application.
Other conditions are being worked out to prevent abuse.
Interpretation of the mobility budget
Employees can choose how to spend the net payment they receive. They don’t need to spend it on alternative transport, like a bike, car parts or public transport. Basically, a percentage of the pay packet is exempted from tax and regular social security contributions.
Calculation and status of the mobility budget
The size of the mobility budget depends on the value of the car that is returned. Ordinarily, the mobility budget is calculated on an annual basis using this formula: price as new x 6/7 x 20%. The value is therefore limited to 6/7 and the mobility budget is paid out over five years.
Private contributions paid by employees for the use of their company car are subtracted from the price as new. Employees who had a company car with a fuel card will have their mobility budget increased by 20%.
To maximize budget neutrality, the mobility budget will have the same (para-) fiscal status as the returned company car. The amount is not subject to regular social security contributions. Employers do pay a so-called solidarity contribution.
Employees pay tax on the amount equal to the taxable benefit in kind of the company car when it is returned. So based on this formula: price as new x regression coefficient x 6/7 x CO2 coefficient.
The reduced value of the car when it is returned is not taken into account in the calculation of the mobility budget. However, it is taken into account to calculate the taxable base. So it is in an employee’s interest to return an older car. It is said that the formula will be indexed every year.