An Act adopted on 30 March 2018 – with retroactive effect as from 1 January 2018 – offers employers the option to introduce a mobility allowance. Within this framework, an employee can apply to return his/her company car in exchange for a cash payment that benefits from preferential social security and tax treatment. Whether this is the end of the road is still a question.


A laborious departure

The Coalition Agreement of 9 October 2014 announced that the Government would create "a legal framework" for "the mobility budget". It has been a bumpy ride.

On 15 December 2017, the Government submitted a draft act on the introduction of a mobility allowance. With this draft act, the Government intended to tackle, in the short term, the prominent role of company cars in Belgium.

In its advice on the preliminary draft act, the Council of State adopted a critical position. According to its advice, there was no guarantee that the mobility allowance would – in all cases – actually be used for more sustainable means of transport. The Council also raised the question as to whether the draft regulation was compatible with the constitutional principle of equality, as the mobility allowance would benefit from a regime that was preferential compared to the regime for ordinary remuneration.

In the light of this advice, the Government reviewed the draft act and elaborated on its justification.

In an opinion dated 21 February 2018, the National Labour Council and the Central Economic Council expressed the view that – from the angle of sustainable mobility – a mobility allowance only makes sense if a mobility budget is also introduced, and a framework for such a budget was suggested. The proposed mobility budget would be an annual budget which offers an employee benefitting from a company car the choice of either complete replacement of the company car or the combination of a more eco-friendly and/or cheaper company car with sustainable means of transport and transport services.

On 16 March 2018 the Government reached agreement on a "mobility budget" scheme which will allow employees, in consultation with their employer, to opt, for example, for a smaller company car, a public transport season ticket, an electric bicycle and/or a cash payment.

The Act was adopted on 30 March 2018 and published in the Official Gazette on 7 May 2018. The Act only relates to the mobility allowance, however, and it is still unclear when the Government will submit a draft act regarding the mobility budget. Legislative proposals to introduce a mobility budget have been submitted to the Chamber of Representatives. The most recent proposal dates from 3 April 2018 and refers to the relevant work of the National Labour Council.

The main features of the Act on the introduction of a mobility allowance are presented below.


Definition and amount

The mobility allowance is an amount of money that the employee receives from the employer in exchange for returning his/her company car, hence its better-known name "cash for car".

The amount of the mobility allowance corresponds to the annual value of the user benefit of the returned company car, which is statutorily fixed, i.e. 20% of 6/7 of the catalogue value of the car (determined in accordance with the tax rules). The percentage is increased to 24% if the employer also bore the fuel costs. The value is reduced by the personal contribution paid by the employee, if any. The valuation is fixed; it does not fluctuate when changes occur in the employee's career. The catalogue value, however, is indexed each year.

The mobility allowance is treated in the same way as the private use of the company car for the application of the statutory, regulatory and conventional provisions from which the employee derived rights relating to the private use of the company car (e.g. the calculation base for a severance payment). 


Introduction, application and attribution

Employers in the private or public sector are free to decide whether or not to introduce a mobility allowance, and whether or not there will be conditions attached. The allowance can be introduced by means of a collective labour agreement, in the work regulations, as a company policy or in (an appendix to) the employment agreement.

The scheme is reserved for employers who have put one or more company cars at the disposal of one or more employees for their private use during an uninterrupted period of at least three years prior to the introduction of the allowance. There are special rules for start-ups.

The scheme does not apply to company cars that have been granted in exchange for total or partial replacement or conversion of remuneration, premiums, benefits in kind or any other advantage.

When an employer introduces a mobility allowance, employees who have been benefitting from a company car for private use during a statutory minimum period can submit a written request to their employer to exchange the company car for a mobility allowance. The employer can decide whether or not to grant the request.

Upon acceptance by the employer, the request and the acceptance constitute an agreement that becomes part of the employment agreement. This agreement is a mandatory employment document which has to be drawn up prior to the attribution of the allowance and which must specify, among other things, the base amount of the allowance.

Attribution of the mobility allowance entails the employee having to return the company car and all related advantages (such as a fuel card, GPS and winter tyres).


Social security and tax treatment

The Act establishes a specific social security and tax regime for the mobility allowance which is similar to that for a company car and is thus preferential compared to the regime applicable to straightforward remuneration.

In respect of social security, the mobility allowance is only subject to the solidarity contribution (CO2 contribution), which is payable by the employer and equals the amount which was applicable to the returned company car. 

In the hands of the employee, the allowance is taxed as a benefit in kind, which is valued on a lump sum basis. The value is reduced by the personal contribution paid by the employee, if any. The employer can deduct the mobility allowance up to a percentage which is statutorily fixed at between 75% and 95%. The Act provides for the uniform application of 75% after a transitional period.

As a rule, the mobility allowance cannot be cumulated with the tax exemption of the allowances granted by the employer as reimbursement or payment of the employee's expenses for travelling between his/her home and the place of work.

The Act also stipulates that if the mobility allowance is granted in breach of the statutory conditions, the special social security and tax regime will no longer apply and the sanctions of social security and tax law will apply.


On the horizon

Now that the mobility allowance has seen the light of day, the focus in the coming months will be on practical experience with the new regime; regulation in relation to the mobility budget; and interaction with the other initiatives aimed at more sustainable mobility.