At the end of September last year, the Belgian government published a Royal Decree to clarify the calculation of the budget for the Federal Mobility Budget and introduce a lump sum calculation method as well. These formulas are to be used both to calculate the available budget as well as the cost to be charged for a so-called “pillar 1” car that the employee disposes of as part of the Federal Mobility Budget.
A detailed review can be found in our newsflash of 4 October 2023. With the entry into effect of this Decree on 1 January 2024, the tax authorities have issued on 15 February 2024 a circular letter, Cir. 2024/C/16, to further comment on these new formulas.
In this newsflash, we want to highlight a few of the interesting points that are introduced or clarified in the Circular Letter.
1. Lump sum formula – the variable calculation
The lump sum formula consists of a fixed and a variable component. For the variable component, a number of kilometers, taking into account the commuting distance of the individual, is multiplied by the assumed cost per kilometer multiplied by the number of workdays.
The cost per kilometer is determined at 30% of the lump sum reimbursement applicable for government officials. For the first three months of the year, this amount is determined to be 0,4269 EUR/km x 30%, i.e. 0,12807.
The number of workdays is set to be 200. This is regardless of the teleworking days.
Furthermore, it should be noted that the number of kilometers is determined by the commuting distance plus 6.000 km of private travel. This also means that the authorities do not take into account professional travels for this calculation.
2. Actual cost formula
It is emphasized that when using the actual expenses-method, the list of cost-elements mentioned in the Circular Letter and Royal Decree are exhaustive. This means that no other costs can be added. Moreover, the costs mentioned in the Circular Letter can only be taken into account when these costs are (1) not yet included in the lease- / rental contract and (2) mentioned as in the car policy of the employer.
3. Timelines
For the determination of the available budget, the tax authorities hint in their Circular Letter to the fixed character of the budget. It is determined when the employee is opting in to the Federal Mobility Budget and remains unchanged except in case of function change such as promotion. This applies both to the actual cost formula as well as the lump sum formula.
We have seen in practice that this strict interpretation is quite difficult to uphold in a situation where de facto, an employee will be able to benefit from a potentially upgraded budget every time the current car lease expires, where the employee with a mobility budget that remains in his function, is stuck with the potentially outdated budget amount for the rest of the career.
Furthermore, for the determination of the cost of the pillar 1 car when the lump sum method is applied, changes in the cost of pillar 1 will occur yearly. Be it when the employee moves or when the lump sum kilometer allowance has changed, the impact will only be visible as from the 1 January following this change.
4. Reference car
The tax authorities acknowledge the market practice that companies use a reference car for the determination of the budgets. Interestingly, they foresee this option both for the actual cost as for the lump sum formula.
It is not explicitly stated whether the reference can also be used for the determination of the variable part of the lump sum formula. This would be quite illogic as the variable part does not refer at all to a car, but the employee situation in terms of commuting.
However, the authorities do mention only two possible option :
- Determination of the mobility budget per individual employee (i.e. based on the individual car)
- Calculation based on a reference car for the given function category
One could conclude that through this paragraph, the authorities accept that also the variable component could be calculated based on a reference commuting distance for the given function category.
Final remark concerning the reference car, the option of using a reference car should be communicated and applied to all eligible employees and choice remains applicable for 3 years.
5. Transitional measures
Interestingly, there are none. The authorities indicate in the Circular Letter that on-going engagements should remain unchanged. As a result, the lump sum calculation for the cost of a pillar 1 car can only be applicable for employees that opt-in to the mobility budget as of 1 January 2024. This obviously does not simplify the administrative burden for employers that need to manage all these co-existing different regimes.
6. Pitfalls
Although one could welcome the attempt for clarification and transparency of the tax authorities, there are still a number of items that in our opinion remain up for improvement.
The aforementioned fact that professional travels are not taken into account in the calculation of the budget or the cost of the pillar 1 car in the lump sum calculation method can pose a significant risk for employer and/or employee. Depending on the situation, the employee can end up with a significantly lower budget than previously, or the employer can find himself with a considerably higher cost of the pillar 1 car than he can recover on the employees mobility budget.
Furthermore, the individualisation of the budgets in this formula are increasing the complexity of administering the different budgets, which is quite a drawback for many organisations.
Also, although less prevalent in this Circular Letter, the fact that the budget is fixed for indefinite period remains difficult to explain to the employees, as it creates potentially an inequality between those with a company car and those with a mobility budget. This certainly may decrease the appetite for employees to opt in to the mobility budget.
Finally, it remains uncertain how the reference car should be applied in the two formulas. Although it would make sense to apply also a reference commuting distance for the consumption of the car from a simplification perspective, it does seem to go against the set up of the variable formula.
Should you have any questions or want to understand based on simulations what the impact is for your organization, please don’t hesitate to reach out to your PwC-contact or Pieter Nobels / Matthias Vandamme.
