New tax law on the greening of mobility - Reform of the mobility budget

We refer to our previous tax alert regarding the new tax law on the greening of mobility, in which several changes to stimulate the usage of zero-emission company cars have been explained. This new tax law has been adopted and published on October 26^th, 2021 in the Belgian Gazette. In addition to the previous mentioned changes  of this new tax law, the reform of the mobility budget has also been adopted via an amendment and included to this final tax law.

Recap of the mobility budget – ‘as is’

In March 2019, the mobility budget was introduced in Belgian tax law. The mobility budget regulations allow employers to install a system through which employees can hand in their company car and opt to receive a yearly budget that can be used to cover their mobility expenses. The system consists of three pillars:

• Pillar 1: The budget is used to finance another environmental friendly company car
• Pillar 2: The budget is used for sustainable means of transport (green alternatives to the company car)
• Pillar 3: The remaining budget is paid out in cash to the employee
  
  

Reform of the mobility budget – ‘to be’

As recent studies have shown that the system of the mobility budget has rarely been used by companies up till now (despite the fact that the alternatives have at least an equivalent social and fiscal taxation regime compared to the company car), the new law wants to adapt the system by expanding the scope of the regime, by making it more flexible and by increasing the accessibility of the system in order to obtain the desired modal shift.

Abolishment of waiting period

The mobility budget is no longer linked to a waiting period of one year anymore in which the employees must have a company car (or be eligible for one) before they can opt for the mobility budget.

If the employee is eligible to a company car conform the company car policy of the employer, the employee can opt for the mobility budget as of day 1.

Pillar 1: zero-emission condition as from January 1^st 2026

Secondly, the law clarifies the zero-emission condition (for the company cars under pillar 1): as from January 1^st 2026 only zero-emission cars can be considered as eco-friendly cars at the time of the request. This condition will also be applicable on all motorized vehicles, carpooling and the rent of cars with a driver.

This measurement is of course to align the mobility budget to the greening of mobility.

Also the exception for end of series vehicles will be abolished (the condition that the minimum emission standard for air pollutants of the car in pillar 1 should be at least equal to the applicable norm of new cars or a later norm was not applicable for end of series vehicles). This means that all cars of pillar 1 should fulfill the conditions of the eco-friendly cars.

Pillar 2: expansion of sustainable means of transport

Subsequently, the scope of the sustainable means of transportation within pillar 2 will be expanded. Currently, two types of transportation are included under ‘sustainable means of transport’: public transport and soft mobility. The scope of public transport will be expanded to subscriptions for public transport for the family members living together with the employee. The scope of the soft mobility means of transportation will be expanded to electrically driven motorized tricycles and quadricycles. In the past, only bicycles, locomotives, motorized bicycles and mopeds, and the electrically driven 'motorcycles' were considered.

Furthermore, the spending options within pillar 2 will be expanded with the following expenses:

Expenses linked to financing and stalling of soft mobility transportation methods. Under the previous rules, only expenses linked to the purchase, renting, leasing, maintenance or mandatory equipment are eligible. For example, expenses for a bike loan or for the parking of a bicycle (private or public) will be eligible under the new law.

• Expenses linked to non- mandatory equipment of soft mobility means of transport. Under the new law, it is sufficient that the equipment is relevant for the protection of the driver and his passengers as well as for their visibility. For example expenses for a biking helmet or a fluorescent vest will be eligible.
• Housing costs of premises within a radius of 10km of the place of employment. In the past, the maximum radius was only 5km. In addition, not only the rents and interests of mortgage loans will be eligible, also capital repayments linked to the dwelling of the employee can be funded with the mobility budget. This way, commuters are encouraged to live close(r) to their work premises, which the government hopes will boost the usage of soft means of transportation even more.
• Kilometer allowance. Similar to the bike premium, the mobility budget can be used to reimburse the actual kilometers travelled by foot between the dwelling of the employee and the place of employment (maximum of 0,24 EUR/km for income year 2021 (tax year 2022) – i.e. pedestrian premium). The same applies to kilometers travelled with an (electrical) locomotive, for example by step, skateboard or wheel chair. This kilometer allowance cannot be cumulated with the tax exemption for allowances for commutes by foot or by means of locomotives as defined in art. 38, § 1, paragraph 1, 9°, c) ITC 92, nor with the tax reduction for the purchase of an electric vehicle (art. 145/28 ITC 92).
• Parking costs linked to the usage of public transport between home and the working place.
  
  

Simplified calculation of and limitations to the mobility budget

Next, the calculation of the amount of the mobility budget or the “Total Cost of Ownership” (TCO) will be simplified and limited. The amount must be at least EUR 3.000 per calendar year and cannot be more than one fifth of the total gross salary of the employee with an absolute maximum of EUR 16.000 per calendar year. Next to that, the new tax law provides the possibility to establish a formula for the calculation of the TCO/mobility budget on the basis of actual costs or a lump sum amount (via a royal decree), which will result in a significant administrative simplification. 

Adaptations to the modalities of the budget

• Lastly, there will be some adaptations/clarifications to the modalities of the mobility budget:
• The mobility budget will be granted on an annual basis, i.e. per calendar year.
• The full mobility budget will be made available on a mobility account, indicating the balance of all three pillars in order to increase the transparency related to pillar 1 costs. In the past, it was sufficient to only show pillars 2 and 3 of the mobility budget in any kind of virtual manner.
• The moment the mobility budget is granted to the employee is also of importance. The amount of the budget is allocated on a pro-rated basis, namely according to the number of calendar days of the year in which the employee participates to the mobility budget system.
• The remaining balance of the mobility budget in pillar 3 (i.e. the amount that the employee has not used to finance pillars 1 and 2), will be paid out once a year in cash, at the latest together with his/her salary of the first month of the following calendar year.
  
  

Entry into force

The above described adaptations of the mobility budget system will enter into force as of January 1^st 2022, except for employers who already had a mobility budget system in place before this new tax law was published in the Belgian Gazette. Those employers have until January 1^st 2023 to comply with the new limitations (to the calculation) of the TCO/mobility budget.