Mobility allowance
Cash for car. After years of preparatory work and excessive media attention the mobility allowance is finally in place. The law that introduces this allowance – often referred to as “cash for cars” - was published in the Belgian State Gazette on May 7, 2018 and is to be applied retroactively as of January 1, 2018.
Basic principle
The starting point of this law is that employees with a company car can exchange that car for a monthly allowance.
The law is based on a principle of double freedom of choice: the employer is free to introduce the system or not, and the employee from his side is free to exchange his vehicle or not. When both parties agree, a written agreement is set up. This agreement is considered a social document to be kept by the employer.
Main conditions
- The employer must have had a system of company cars in place for 36 months on end prior to the introduction of the mobility allowance. New employers are exempt from this rule, provided that at the time of the introduction of the allowance, they have at least 1 or 2 company cars in use.
- During that period of 36 months, the employee must have had a company car for at least 12 months, of which 3 months on end prior to the application. Should an employer hire a new employee who already had the mobility allowance with his previous employer, both parties can agree to maintain this advantage. If the employee had a company car with his previous employer for under 12 months, then he can transfer the months already accrued and complete his term with his new employer.
Amount of the allowance
The amount of the allowance will be determined on a year’s basis and depends on the value of the car that is being exchanged. The formula is as follows: catalogue value x 6/7 x 20%.
If the employee had a fuel card, the formule becomes: catalogue value x 6/7 x 24%.
Potential personal contributions must be deducted. To set the corresponding monthly amount, the yearly reimbursement is to be divided by 12.
An example: exchange of a company car with a catalogue value of € 29.475 + fuel card. Yearly reimbursement = € 29.475 x 6/7 x 24% = € 6.063,43. The monthly reimbursement = € 6.063,43/12 = € 505,29.
The mobility allowance is not considered to be salary so the classic social security contributions are not applicable. The employer however pays a solidarity contribution that equals the solidarity contribution that was due on the exchanged company car.
From the employee’s side, the reimbursement is free of social security charges, but the employee does pay taxes on the amount that results from the following formula: catalogue value x 6/7 x 4%.
This reimbursement obviously is brought to life to finance the employees’ daily commute, despite the chosen means of transportation. Therefore, the employer will no longer compensate transportation in any other way once the employee opts for the exchange.
The reimbursement will be granted as long as the employee does not have a company car in a function that normally comes with one.
The reimbursement will be indexed every year on January 1st, according to a system that still needs to be defined by Royal Decree.
Mobility: allowance or budget?
The mobility allowance that is the subject of this newsletter is not the same as the mobility budget, upon which the federal government reached an agreement recently. Based on the information we have right now, the mobility budget is foreseen for employees who exchange their company car for a more eco-friendly model, supplemented with alternatives, such as a subscription for public transport or an electric bike. The budget that might still be remaining, may be paid in cash.
