In the Belgian Official Gazette of 7 May, the Act of 30 March regarding the introduction of a mobility allowance – the co-called “Cash for Cars” – was published. This Act provides for the possibility for employees who have a company car at their disposal to exchange this company car for a compensating cash allowance with a similar social security and income tax treatment, provided certain conditions are met.
Origin and conditions
In order to try to ease the pressure on Belgium’s notoriously congested roads and with the important part company cars play in this respect in mind, the Belgian government designed a system to reduce the number of company cars: the mobility allowance.
This new system provides for the possibility for an employer to offer its employees who have a company car at their disposal with the opportunity to exchange this company car for a compensating cash allowance.
The new mobility allowance scheme is entirely voluntarily: both for the employer and the employee. The employer can introduce a system of mobility allowances in the company, following which the employee can decide whether or not to take part in exchanging his company car for said allowance.
A mobility allowance can only be introduced in the company if the employer has put a company car at the disposal of one or several of its employees during an uninterrupted period of 36 months prior to the introduction of the allowance. Further, an employee can only request to exchange his company for a mobility allowance if he had a company car at his disposal for an uninterrupted period of at least 3 months prior to the request and at least 12 months during the 36 months prior to said request.
Note that the mobility allowance cannot be used if the company car was (partly) attributed as a replacement for or conversion of existing salary, benefits … (e.g. if the attribution of the company car was accompanied by a salary sacrifice).
Specifics of the mobility allowance
The mobility allowance is a cash amount that equals the yearly benefit of the use of the exchanged company car for the employee, valued at 20% of 6/7th of the company car’s catalogue value or 24% of 6/7th of the company car’s catalogue value if fuel costs for the private use of the company car were borne by the employer. No regular social security contributions are due on the amount of the cash allowance. However, the solidarity contribution that was due by the employer on the exchanged company will continue to be due after the switch to a mobility allowance.
For income tax purposes, the mobility allowance will be considered as a taxable benefit, valued at 4% of 6/7th of the exchanged company car’s catalogue value.
Entry into force
The mobility allowance entered into force retroactively as from 1 January 2018.