The federal government recently reached an agreement on a cash-for-cars scheme. This means that employees can exchange their company cars for a remuneration in cash that would receive the same tax treatment as the company car. "With it, the Michel government hopes to reduce the number of company cars on the road, but just like many other organizations, we expect it will only have a limited effect," says Frank Vancamp, partner and tax specialist at KPMG."
The traffic on our roads is only getting busier and each year traffic jams become longer and longer. This is not only due to a rise in freight traffic but also to the ongoing increase in the number of company cars on the road. Because of the high costs involved with employment, company cars have become a standard part of the salary package. In order to improve mobility, the government is looking for ways to reduce the number of company cars. One possible way to achieve this, is to introduce a mobility budget.
Frank Vancamp: "The mobility budget already exists today. A number of large of firms (including banks) have already started using it by offering employees the choice between a company car and a mobility budget. This budget can be allocated to various means of transportation at their own discretion. Unfortunately, the mobility budget has not been very successful so far. The most significant reason for this is that it’s quite complex to set up a multimodal mobility budget from a legal tax perspective. For example, you need to draw up rulings with the tax authorities to make sure which tax treatment the budget receives. This also explains why the mobility budget has not been embraced by smaller companies yet. They are interested, but the complexity of the system is scaring them off.“
Recently, the federal government has devised a cash-for-cars scheme. The principle is that employees can exchange their company cars for a gross remuneration. "This has been criticized by different parties, including employers' and employees' organizations," says Frank Vancamp. "And I understand their arguments. After all, there is no guarantee that when someone chooses a cash remuneration, they will effectively change their commute to and from work. It is being promoted as a kind of mobility budget, but in reality it isn't. People will be more likely to consider this an opportunity to optimize their salaries, tax-wise.“
"The calculation of the 'cash for cars' budget doesn’t completely align with the package that is included with most company cars. For example, if you look at the maintenance costs and insurance costs. But keeping in mind that the calculation is based on the Blue Book value of the car and, in this way, it does resemble how the CO2 contribution and the personal 'benefit in kind' is calculated. So, it can be interesting for employees. Still, the FEB employers' association isn't convinced. They prefer advocating a tax reduction which will increase the gross income of employees," explains the KPMG tax specialist. The Planning Bureau, on the other hand, believes that the new scheme will not be interesting enough for 'frequent drivers' to exchange their company cars.
Based on what we know now, (and therefore pending the final texts of the scheme), we can already provide an example: if you have a company car with a Blue Book value of EUR 24,500 (and a monthly lease price of roughly EUR 740), supplemented by an employer's fuel card, the annual benefit will easily run up to approximately EUR 9,000 - 10,000. Returning the company car means you will receive a cash remuneration of approximately EUR 5,040. In both cases, employees will still be taxed on the benefit in kind, which amounts to roughly EUR 1,280 every year. So, the 'cash for cars' principle results in a gross cash income of roughly EUR 360 per month.
But, here too, complications can arise. Frank Vancamp: "Returning a company car does not mean people will no longer have work related transport. Within the cash-for-cars scheme, it is still possible for kilometers driven for specific work assignments to be reimbursed separately. I think that employers are not overjoyed of the prospect of going back to having to go through expense reports and mileage allowances...“.
That is why KPMG continues to advocate a real mobility budget: "We have even researched the possibilities of implementing a multimodal mobility budget. This would involve a budget that employees can manage themselves, whereby they are free to opt for no or a smaller company car, for example, and add public transport and/or a bicycle. These kinds of combination packages are already being offered by leasing companies and other parties. We believe that this is the most effective way to tackle mobility.“
Minister Van Overtveldt, has, in the meantime, announced that the cash-for-cars scheme must be regarded as the first step in the development of a mobility-stimulating tax policy. "We will have to wait and see whether this legislature will succeed in taking further steps. We have noticed that this involves sensitive matters. Just think of the discussions in regards to the Eco-vouchers and meal vouchers. We will certainly follow this matter closely," says Frank Vancamp.