Introduction
The mobility week has also set our government in motion, as a Royal Decree was published last week, on 29 September 2023, in an attempt to provide clarification and simplification in the framework of the Federal Mobility Budget
The Decree not only amends the way the budget is tracked towards the employee, but also introduces a long-awaited formula for the calculation of the so-called Total Cost of Ownership (TCO) value.
This TCO value has become in practice the baseline value to determine the amount of the mobility budget provided to employees handing in their car. However, the concept TCO had previously never been defined by the legislator and the FAQ (NL/FR) didn’t bring much more clarity in this respect. This led to different interpretations in practice, creating confusion especially for organizations working with different vendors. With the new formulas, the government hopes to simplify the calculation and to make the mobility budget more attractive.
New formula, but on which car?
While the initial principle behind the Federal Mobility Budget starts from an individual reconciliation of the TCO value of the actual car that is being swapped, the authorities have quite quickly allowed through the FAQ the practice of using the TCO of a reference car per function group within the workforce. Given the considerable administrative simplification of the latter approach, it has been broadly adopted by the market.
Although this approach is still not explicitly confirmed in the new Royal Decree itself, the introduction report does confirm that organizations can continue to use reference cars, thus meeting the concern of the National Labour Council (and many employers with them).
The new formula, two choices
Besides the question whether the TCO calculation is based on the actual or a reference car, the new Royal Decree stipulates that the employer has two choices for the method of calculating the TCO :
- based on actual costs; or
- based on a lump-sum basis.
Both methods can serve to determine both the total amount of the mobility budget, but also the budget consumed by the pillar 1 spending, i.e. the eco-friendly car.
Actual costs
Being initially the sole method of calculation of the TCO, there has been a lot of discussion around which costs could actually be included.
Moving forward, the actual cost calculation now has to be based on an exhaustive list of costs that has been published in the Royal Decree. To bypass annual fluctuations, the budget is calculated on an average over a reference period of four years.
Lump-sum formula
The lump-sum formula consists of two components: a fixed component and a variable one. Depending on whether the car was bought or leased, the fixed component is calculated differently. The variable component is in both scenarios calculated in the same way:
Fixed component:
- If the car is purchased or in financial renting: 25% of the list price + CO2-contribution
- In case of a lease : annual lease price (including insurance, maintenance, etc.) + corporate income tax on disallowed expenses, non-deductible VAT + CO2-contribution
Variable component (regardless whether the car is bought or leased):
- (6.000km + (distance home-work x 2 x 200)) x 30% of the legal kilometer allowance)
As from 1 January 2023 the legal kilometer allowance has been set to 0,4259 EUR/km so for the purpose of this formula, an amount of 0,13 EUR/km will be considered.
Some observations
The Royal Decree aims at reducing the complexity and ambiguity of determining the TCO. While this initiative will be welcomed by many, there remains still uncertainty around certain elements considered and additional questions arise.
First of all, the Royal Decree introduces a variable component relating to the “fuel” consumption. Previously, in the FAQ, the authorities allowed this element also to be estimated based on a reference for a group or function in the workforce. While the government has been quite explicit around the use of a reference car to determine the cost, there is no mention of a reference fuel consumption budget. With the focus of the lump sum variable calculation on the commuting distance, it is unclear how this should be combined with the use of function-based references.
However, switching to an individual calculation (based on commuting distance) would significantly increase the complexity of the application of the Federal Mobility Budget, which would not be of interest for any party involved.
Secondly, the corporate tax cost for the disallowed expenses and non-deductible VAT are included in the calculation of the TCO. Yet, it is not specified whether these costs should be grossed up or not.
Furthermore, it is quite remarkable that the variable component is calculated exclusively based on the (estimated) private mileage. Complete abstraction is made of professional mileage. In the event the employer decides not to separate the professional mileage when calculating the TCO, it could mean that the employee that uses his budget for a first pillar environmentally friendly car, would only be deducted his private consumption based on the lump sum formula and not his professional mileage. As a result, the employer would technically be paying this budget twice.
Finally, there are some minor questions that arise. For example, the fixed amounts introduced in the Royal Decree, one can ask the question whether these should be prorated in case of specific circumstances. Another example is the average costs to be taken into account for calculating the available budget. This needs to be taken over 4 years, while the average costs to calculate the consumption of the eco-friendly car in pillar one is considered over 3 years. It remains unclear what the logic is behind this distinction, and it certainly does not add to the aim of simplification and clarification.
All in all, considering that the majority of the market already worked with reference TCO budgets, one can ask whether downsides of the stricter calculation methods and additional questions the Royal Decree entails, weighs up to the clarification it brings for the more exceptional use cases where organizations work with actual costs or on an individual basis.
However, organizations that have implemented the Federal Mobility Budget should nevertheless be aware that this formula will also serve as an assessment base for the tax authorities when auditing the implementation and budgets paid out under the Federal Mobility Budget.
Therefore, considering the new formulas will enter into force as of 1 January 2024, we strongly recommend organizations to revisit the set-up of their policy and ensure the budgets used are compliant with the new calculation methods.
Should you be interested or would like to have more information on this topic, don’t hesitate to reach out to Pieter Nobels or Matthias Vandamme.
