Belgian Tax reform – Individuals – Personal income tax

Latest update: 18 December 2018

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 some equity incentives. The draft law introducing a mobility budget is currently under review at the Chamber and the draft law modifying the Act of 30 March 2018 introducing a mobility allowance has been recently introduced at the Chamber.

Employer’s tax reporting obligations

When foreign headquartered companies grant stock options to employees of their Belgian subsidiaries, such option grants – if taxable at grant – are ALWAYS reportable by the Belgian employing subsidiary on the employee’s individual statement 281.10. This reporting obligation is due irrespective of whether the Belgian subsidiary is involved in the option grant or expenses the stock option in its financial statements.

So far, no equivalent reporting obligation exists if Belgian employees are granted free shares or benefits (e.g. Restricted Stocks, Restricted Stock Units, …) by the foreign parent company, except where the Belgian employing subsidiary iss involved in the grant (which triggers a withholding tax obligation) or expenses the cost in its financial statements. Things are likely to change. Indeed, the ‘Job Deal’ agreed upon by the government – but still to be introduced and voted by the chamber – would actually provide that such grant would ALWAYS become reportable by the Belgian subsidiary to the Belgian tax authorities and even trigger a withholding tax obligation as from 2019.

Mobility budget (under review at the Chamber)

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. At this point in time, the Mobility Budget is pending in the Chamber for discussion and voting.

It is anticipated that the mobility budget – if adopted by the parliament – will co-exist with the recently introduced mobility allowance. Where the mobility allowance can only be granted under the beneficial tax and social security treatment if an employee hands in his/her company car, the announced mobility budget allows the employer to provide an (eco-friendly) company car while possibly also creating still budget for other ways of transportation.

The amount of the mobility budget would be 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, … .

The main conditions for implementing the mobility budget are foreseen to be the same as for the mobility allowance.

When an employer chooses to introduce the features of a mobility budget, the employee would have the possibility to opt for a smaller, more eco-friendly and cheaper model (under the existing car policy of the employer). The new, more eco-friendly car would be treated in the same way as any other company car, meaning that there would be a taxable benefit in kind in the hands of the employee, a limitation of the corporate cost deductibility for the employer based on the CO2 emission of the car and a CO2 contribution due.

For the remaining part of the TCO of the car handed in by the employee, a mobility budget would be created to which the employee would be entitled. He/she can choose to use this budget for alternative (and more sustainable) means of commuting, such as a subscription for using public transportation, for a system of car sharing, for a bike … or even for using the budget to finance a dwelling closer to work (within a range of 5 km). It is foreseen that this part of the budget could be provided tax free and would be fully deductible for the employers.

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) the delta would be paid out to the employee in cash each year. Based on the current draft law, this payment would only be subject to a special withholding of 38,07% to be paid by the employee.

Act of 30 March 2018 introducing a mobility allowance (Official Gazette 7 May 2018)

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 use a company car) 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.

Recently the government introduced a draft bill in Parliament amending parts of the legislation and clarifying some aspects of the law which lead to some uncertainties in interpretation. The most important changes are that – once the bill is voted – an employee will no longer have to choose and drive a car for a minimum period of 12 before being able to opt for this system. Having the right to a car for this period will become sufficient in order to qualify for this budget. Also some uncertainties with respect the the tax deductibility of a potential own contribution are clarified in this draft bill.