Sustainable (green) mobility
Tax alternatives to the company car
Delphine Vanassche, Senior Manager BDO Tax
In 2022, the company car is more popular than ever. Nevertheless, the ‘greening of the fleet’ is currently high on the agenda of many employers and employees. This is partly due to the change in the taxation of company cars, which affects both employers and employees. But the evolution towards sustainable business is also playing a major role. We explore two tax alternatives to the oh-so-popular company car.
Greening a vehicle fleet is not just about gaining tax advantages, of course. Green mobility has an impact on many links in the business chain. We discuss this in more detail in the article ‘Roadmap towards a sustainable fleet’.
Belgian legislators have already made a number of attempts to offer an alternative to the ever-popular company cars. The ‘cash for car’ concept did not receive much support. The alternative – the mobility budget system (created in 2019) – offers the possibility of retaining company cars, supplemented by more sustainable mobility solutions. In 2022, more than ever, we see mobility budgets for employers and employees as valuable alternatives. Why?
In the mobility budget system, employees can ask their employers to replace their (current) company cars (or their claims to them) with an annual budget that can then be spent in 3 areas, or pillars:
The budget, which can be spent freely, is based on the total cost of ownership of the company car to which the employee is (or would be) entitled.
The system might be of interest to employers, since all expenses from pillars 2 and 3 are fully tax-deductible. For employees, the expenses in pillar 2 do not provide a taxable benefit and are exempt from social security contributions. If part of the budget is converted into cash (pillar 3), it is tax-free. However, a special contribution of 38.07% is payable. The expenses incurred in pillar 1 follow the rules on car taxation.
To make mobility budgets even more attractive, expenses within pillar 2 have recently been increased significantly. From now on, the following expenses will also be eligible:
bicycle loans, storage costs and safety equipment costs;
public transport passes for family members cohabiting with the employee;
parking costs associated with the use of public transport;
a fixed pedestrian compensation of EUR 0.24/km for commuting;
repayments on the principal of a mortgage loan on a residence that is closer to work (the residence may be up to 10 km from work).
Employers do not have to offer all possible options or all pillars. However, since 1 January 2022, they must offer at least 1 option within pillar 2.
In addition, legislators have limited each mobility budget to a minimum of EUR 3,000 (on an annual basis) and a maximum of one-fifth of the employee’s gross annual salary, with a cap of EUR 16,000.
“The mobility budget allows you to keep the company car and supplement it with more sustainable mobility solutions.”
In recent years, spurred on by the ‘war for talent’, many companies have been investing heavily in flexible compensation (so-called cafeteria plans). As part of a cafeteria plan, employees are given the opportunity to exchange a component of their remuneration (end-of-year bonus, etc.) for a form of compensation that offers more satisfaction. In cafeteria plans, a clear trend towards sustainable mobility solutions (bicycles, public transport) is also apparent. Creating a stable work-life balance is also very popular with employees. For example, an employee can use his or her budget for supplementary holidays. Depending on the choice made, each benefit is specifically valued and taxed.
The cafeteria plan allows the employee to (possibly) derive more net benefit from his or her salary without increasing the costs to the employer. It’s a win-win situation. However, unlike the mobility budget system, the flexible compensation system is not legally regulated. This is why many employers have applied for rulings in the past.