As from January 2018, employees have the possibility to exchange their company cars for a mobility allowance – the so called Cash for Cars system. This mobility allowance is subject to a beneficial social security & income tax treatment. The main goal of the implementation of the Cash for Cars system was to tackle the mobility problems in Belgium. The law was controversial from the beginning. Indeed, at the time of the introduction, the Council of State gave a critical advice on the new law, stating, among others, problems with the constitutional principles of equality and non-discrimination.
After the implementation of the law, some unions and climate organisations made an appeal for annulment of the Cash for Cars law and the Constitutional Court now agrees with them.
The main reason for the annulment is that the Cash for Cars system leads to the unequal tax treatment of wages. The cash benefit that replaces the car is taxed more beneficial compared to normal cash payments. The fact that only those who own a company car can make use of this favorable tax regime, is discrimination according to the Constitutional Court.
Another reason for the annulment is that the scheme offers insufficient guarantees that there will ultimately be less cars. After all, those who receive the cash allowance can use it to buy a second-hand car.
The annulment of the Cash for Cars system starts at the end of this year. Employees that already make use of the system are given the time to look for alternatives.
