Belgian Tax reform – Individuals – Personal income tax
Latest update: 1 April 2019
On 24 July 2018 the federal government reached a social and labor “summer agreement” (so-called jobsdeal) containing some tax measures, such as changes to employer’s tax reporting obligations of incentives granted by foreign group companies. The Act introducing these measures, the law introducing a mobility budget and the law amending the Act of 30 March 2018 introducing a mobility allowance have been recently published in the Official Gazette.
Employer’s tax reporting and wage withholding tax obligations (Act of 11 February 2019 – Official Gazette of 22 March 2019)
The Act of 11 February 2019 introducing a reporting and wage withholding tax obligation in the hands of Belgian employers/companies, in case affiliated foreign companies grant taxable benefits to employees or company directors working for a Belgian company has been published in the Official Gazette.
A wage withholding tax obligation is introduced (for income taxable) as from 1 March 2019. The obligation to withhold wage taxes lies with the Belgian employing company, even if the employer or company does not intervene in the grant of the benefits. Following this obligation to withhold wage taxes, the Belgian company will also have to report the benefits on the 2019 salary statement (fiche 281.10/281.20), resulting from the Belgian payroll administration and which need to be submitted with the Belgian tax authorities in 2020. As there is no withholding tax obligation for the taxable benefits granted by foreign affiliated companies in the period as from 1 January 2019 up to 28 February 2019, a separate reporting obligation of the Belgian employer/company is introduced as well. However, it is not clear yet how the taxable benefits granted between 1 January 2019 and 28 February 2019 will have to be reported
Regardless the withholding tax and reporting obligation, the beneficiary will of course still have the obligation to report these benefits in his/her Belgian resident or non-resident personal income tax return.
Act of 17 March 2019 introducing a Mobility budget (Official Gazette 29 March 2019)
Following the introduction of the mobility allowance (“cash for car”), the government also introduced the mobility budget, which is actually the next step in the effort of reducing the number of cars on the Belgian roads. The Act introducing a mobility budget has been published and enters into force as of 1 March 2019.
The mobility budget co-exists with the recently introduced mobility allowance. Where the mobility allowance only allows the employee to receive a cash compensation (under a more tax beneficial treatment) for handing in his/her company car, the mobility budget allows the employer to provide an (eco-friendly) company car while possibly also creating still budget for other ways of sustainable transportation. The main conditions for implementing the mobility budget are foreseen to be the same as for the mobility allowance.
The amount of the mobility budget is based on the “total cost of ownership” (TCO) of the company car which is handed in by the employee. This is the total cost, on a yearly basis, which the employer bears for providing a company car to the employee, including the cost for fuel, insurances, taxes, maintenance, … .
In practice, employees will have the possibility to spend the budget via the following three pillars:
Pillar 1: employees can opt to exchange their current company car for a less polluting or a full electric car. The CO2 emission of the chosen car has to be less than or equal to 105 g per kilometer. This amount will decrease in 2020 to 100 g per kilometer and in 2021 to 95 g per kilometer. The eco friendly car will be treated in the same way as any other company car. This means that there is a taxable benefit in kind, a limitation of the corporate cost deductibility (if applicable) for the employer based on the CO2 emission of the car and a CO2 contribution due.
Pillar 2: For the remaining part of the mobility budget created by the car handed in by the employee, he/she can choose to use this budget for alternative (and more sustainable) means of transportation, such as a subscription (for commuting purposes) or tickets (for private purposes) for public transport, for a system of car/bike sharing, buying a bike, … or even for using the budget to finance a dwelling closer to work (within a range of 5 km). This second pillar is very beneficial as this part of the budget can be provided free of personal income taxes/ social security contributions and would be fully deductible for the employers.
Pillar 3: In case there is still budget available (after switching the current company car for a smaller model and/or making use of alternative means of transportation) this will be paid out to the employee in cash each year. This payment is only subject to a special social security contribution of 38,07% to be borne by the employee.
The general conditions to implement a mobility budget are the same as for the implementation of a mobility allowance. Employers should have a company car policy for at least 36 months, unless the employer is a start-up. Employees are only entitled to a mobility budget when they had a company car at their disposal (or they were entitled to a company car, regardless of whether the employee did accept this company car or not) for an uninterrupted period of at least 3 months prior to the request and at least 12 months during the 36 months prior to the request.
A Royal decree of 21 March 2019 implementing the Act of 17 March 2019 has also been published in the Official Gazette on 29 March 2019.
Act of 30 March 2018 introducing a mobility allowance (Official Gazette 7 May 2018) amended by the Act of 17 March (Official Gazette 29 March 2019)
The Act introducing the Mobility Allowance (“Cash for car”) offering the employees a cash alternative for their company car has been published in the Official Gazette of 7 May 2018. As of 1 January 2018, employees (who already have a company car available) can be given the choice to exchange their current company car for a cash compensation, provided that both parties (employer and employee) agree to do so. As it is a voluntary scheme, the employer needs to decide to offer this possibility (and determine the conditions within the provisions of the law) and the employee can opt (voluntarily) to apply for this scheme. For more information on the mobility allowance please refer to our newsflash of 25 May 2018.
The Act of 17 March 2019 amends parts of the legislation and clarifies some aspects of the law which lead to some uncertainties in interpretation. Via these changes the government hopes to increase the attractiveness of the mobility allowance as well as to align it with the mobility budget.
The most important changes in comparison to the law of 30 March 2018 introducing the mobility allowance are that an employee will no longer have to choose and drive a car for a minimum period of 12 months before being able to opt for this system. Having the right to a car for this period will be sufficient in order to qualify for the allowance. Next to that, the waiting period of one year will be abolished for new hires and in case of a change of function, the employee may be entitled to a different mobility allowance based on a higher (or lower) category of company car linked to the new function. Also some uncertainties with respect to the tax deductibility of a potential own contribution are clarified. Also note that the exclusion of company cars that were provided after a so called “salary sacrifice” (i.e. the employee got a company car after a decrease of his gross salary or loss of other income) is maintained.
The changes on the mobility allowance enter into force at the same date as the mobility budget (i.e. 1 March 2019).