The Belgian government has confirmed that the mobility allowance will be installed as of January 1, 2018. Company cars can be replaced for more net salary conform to the principle of “cash for car”, if certain conditions are fulfilled. The operation should be cost neutral for the employer, the employee and the Belgian government. Furthermore, it’s the ambition of the government to reduce the number of company cars by implementing this new principle.

AlertMobility allowance as alternative for the company car approved by the Council of Ministers

PrincipleOn September 29th, the Council of Ministers approved the preliminary draft of law which gives an employee the possibility to exchange his/her company car for a mobility allowance.

The mobility allowance needs to fulfill three essential conditions: • Voluntary basis

both the employee AND the employer should be able to freely opt in or out for the mobility allowance.• Competitive character

the mobility allowance should be treated competitively with the current rules of the company car for both taxation and social security purposes.

• Cost neutrality the operation should be cost neutral for all parties involved i.e. the employer, the employee and the Belgian government.

Example

Catalogue value Yearly mobility allowance Yearly mobility allowance Yearly mobility allowance Yearly mobility allowance

no own contributions no own contributions own contribution of EUR 600

own contribution of EUR 600

no fuel card fuel card no fuel card fuel card

€ 25.000,00 € 4.285,71 € 5.142,86 € 3.685,71 € 4.542,86

€ 35.000,00 € 6.000,00 € 7.200,00 € 5.400,00 € 6.600,00

€ 50.000,00 € 8.571,43 € 10.285,71 € 7.971,43 € 9.685,71

Modalities Although the draft law doesn’t impose important implementation restrictions (i.e. a company policy would do), various conditions and anti-abuse measures are foreseen, amongst them, but not limited to: • A company car policy must be in place for a continuous

period of minimum 36 months (excepted for young companies2) before the implantation of the mobility allowance.

• The employee must have had a company car at his disposal for at least 12 months in the past 36 months3 and at least 3 continuous months before the request.

• In case the employee changes employer, he/she should be able to apply for the mobility budget in case :• he/she already received a mobility budget from his

previous employer or;

• in case he/she had a company car at his disposal with a previous employer for at least 12 months in the 36 months4 before the request, assuming he opt for the mobility budget within 1 month;

• in case he/she had a company car for less than 12 months with his former employer, he can continue his waiting period with his new employer.

Social securityThe mobility allowance will be subject to the same treatment as the former company car (i.e. no employee social security contributions but a solidarity contribution due on behalf of the employer).

1 Catalogue value of the car at the employee’s disposal during the period of 12 months before the mobility budget is granted. In case the employee had more than one car at his/her disposal during this period, the catalogue value of the car that he/she had the longest will be taken into account. In case the employee has more than one car at a time, the budget will be calculated on the catalogue value of the car that he/she turns in or on the catalogue value of the car of his/her choice in case all cars will be turned in.2 Not applicable in case the employer is active for less than 36 months provided that at least one employee had a company car at his disposal at the moment that the mobility budget will be implemented.3 Not applicable in case the employer is active for less than 36 months.4 Not applicable in case the former employer was active for less than 36 months.

Calculation of the mobility allowanceWith the new measure, the employer can provide the employee with the possibility to turn in the company car in exchange for cash. The amount of cash that will be granted in exchange for the company car (incl. related benefits e.g. fuel card, options,…) will be calculated and determined according to the following rules:

Catalogue value1 x 6/7 x 20%

In case the employee has a fuel card at his disposal, the budget will be increased with an additional 20%.

In case an own contribution is contributed by the employee, a pro rata of the own contribution paid in the month prior the company car will be turned in, should be deducted from the mobility allowance.

The mobility allowance, determined at the time of the conversion, is fixed and cannot be increased / decreased as result of the career’s evolution (i.e. change of function, promotion,…), a company car policy upgrade / degrade), etc... However, an indexation of the catalogue value based on the health index is foreseen.

Individual taxationThe mobility allowance will be considered as a taxable benefit in kind, comparable with the taxation of company car, and will be taxed based on the progressive tax rates. The taxable amount will amount to5:

5 The benefit in kind will be at least the minimum benefit in kind of EUR 820 (to be indexed, EUR 1.280 for income year 2017), that is applicable on the benefit in kind for the company car (art. 36 §2 CIT92).6 = 25.000 x 6/7 x 6,6%7 = 25.000 x 6/7 x 4%8 = 45.000 x 6/7 x 9,3%9 = 45.000 x 6/7 x 4%

Example 1Company car: • Catalogue value: EUR 25.000• Date of first registration: 1/1/2017• CO²-emission: 98 g/km• Fuel type: Diesel• Fuel card at disposal

BIK Company Car BIK Mobility Allowance

Minimum BIK Mobility Allowance

€ 1.414,296 € 857,147 € 1.280

Illustration monthly salary:

With company car

With mobility budget

Gross base salary 3.500,00 3.500,00

- Social security contributions (on gross salary)

- 457,45 - 457,45

BIK Company Car 117,86 -

BIK Mobility Budget - 106,66

Taxable 3.160,41 3.149,21

Personal income tax - 1.116,99 - 1.063,66

- BIK Company Car - 117,86 -

- BIK Mobility Budget - - 106,66

Mobility budget - 428,57

Special social security - 38,12 - 38,12

Total net 1.887,44 2.369,34

Example 2Company car: • Catalogue value: EUR 45.000• Date of first registration: 1/1/2017• CO²-emission: 125 g/km• Fuel type: Diesel• Fuel card at disposal

BIK Company Car BIK Mobility Allowance

€ 3.587,148 € 1.542,869

Illustration monthly salary:

With company car

With mobility budget

Gross base salary 4.500,00 4.500,00

- Social security contributions (on gross salary)

- 588,15 - 588,15

BIK Company Car 298,93 -

BIK Mobility Budget - 128,57

Taxable 4.210,78 4.040,42

Personal income tax -1.693,16 - 1.628,87

- BIK Company Car - 298,93 -

- BIK Mobility Budget - - 128,57

Mobility budget - 771,43

Special social security - 53,60 - 53,60

Total net 2.165,09 3.008,81

Catalogue value x 6/7 x 4%

Examples Calculation of the benefit in kind of the company car compared to the benefit in kind of the mobility budget.

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Corporate tax The cash amount will be 75% deductible, with the possibility of a higher percentage (up to 95%) in the first years depending on the C02-emission of the company car that’s being replaced.

Furthermore and in line with the treatment for company cars without or with fuel card, the company would have to report 17%/40% of the annual taxable benefit of the mobility allowance as a non-deductible expense. This would constitute a minimal taxable basis without the possibility to offset any tax attributes.

VATWe recommend to also screen any VAT consequences on the ‘cash for cars’ scheme. Depending among others on the future use of the returned cars, VAT adjustments may be possible or required’.

ImplementationJanuary 1, 2018 (foreseen start date)

Way forwardThe preliminary draft of law has been submitted to and is currently evaluated by the Belgian Council of State before it can be implemented in practice. We will closely monitor the evolution of this law and will keep you updated on the latest information via our various channels.

We are available to discuss with you your concerns and thoughts with respect to this draft bill, it’s limitations, the pitfalls, the financial consequences for both employer and employee as well as the impact on the administrative side.

ContactFor additional information with respect to this alert, please reach out to Jean-Nicolas Lambert or your regular tax contact at EY Belgium or visit our website http://www.ey.com/be/en/services/tax for an overview of services and key contacts.