(Electric) company cars and alternatives
This week is Mobility Week, the European Commission’s annual initiative to highlight sustainable mobility.
It’s the perfect time to reflect on the tax benefits of electric company cars, but also on alternatives such as the mobility budget or the "cafeteria plan".
Today, sustainable mobility is indeed about much more than just company cars, it is also accompanied by a general shift in mentality.
The company car
The first question we can ask ourselves from a tax perspective: why are employees rewarded with a company car?
In order to compensate for the strong taxation on income from work in Belgium, the flat-rate determination of the BIK (Benefit in Kind) was introduced.
- In 2023 from EUR 42 370 gross, the employee is taxed in the highest bracket, i.e. 50% (not including municipal surcharges).
- An example of when a diesel vehicle with a catalogue value of EUR 42,000 and CO2 emissions of 140 g is granted: BIK = EUR 4,608.
- This means the employer provides a purchasing power of more than EUR 10,000 per year to the employee, who pays taxes on just EUR 4,608.
This formula has existed since 2012 (6/7th of the catalogue value x CO2 coefficient). But even before that, making a car available to employees generated an attractive fixed benefit in kind. In 2001 this was calculated on the basis of fiscal horsepower and private KMS with a minimum of 5,000 KMS. For example, a car with 11 hp can generate a BiK of EUR 1,512.
Although the Federal Government recently discarded the tax reform, all parties agreed on the need to reduce pressure on labour income.
Such a reduction is difficult to achieve if the interesting formula of the BIK is changed, a system that has been in place for nearly a quarter of a century.
The advantages of the electric company car
With 100% corporate tax deductibility and minimal CO2 contribution, the advantages of an electric company car over other conventional motorisations are significant.
In addition, there are a number of other major advantages:
- Initial registration tax: EUR 61.50 in Wallonia and exemption in Flanders (vs. progressive rate depending on the assets, up to EUR 5,000).
- Road tax: EUR 97.68 in Wallonia (vs. progressive rate by equity).
- Fuel: with a few exceptions, the cost per km is lower for electric propulsion than for diesel or petrol.
- Maintenance: the cost of an electric car is much lower than the maintenance of a thermal car.
- Resale value: the increasing supply of electric vehicles and their benefits will only reduce the demand for vehicles with combustion engines. Over time, both professionals and private individuals will be less interested in this, while the resale value of electric vehicles remains stable.
Alternatives: the mobility budget and ‘cafeteria plan’
The mobility budget is a tax system with which you can replace your company car with a budget to spend on greener alternatives. E.g. public transport subscriptions or a contribution to your rent or loan. However, there are a number of conditions limiting access to the scheme, such as employers' and employees' conditions. In addition, some limitations apply to the calculation of the budget.
Another alternative is the ‘flexible income plan’ (cafeteria plan). As an employer, this allows you to offer your employees a certain degree of flexibility in the composition of their salary package. For example, it is possible to convert an end-of-year benefit into a bicycle lease scheme. For the time being, this type of initiative is still rather limited.
The legal complexity of these two mechanisms can be an obstacle, but don't let this stop you as an employer. Seek advice from an expert and search together for mobility solutions that take into account the current needs and wishes of your employees. In this way, you respond to the positive change in mentality that is currently taking place in relation to these alternatives.
Would you like to know more about these forms of sustainable mobility?
Then take a look at our e-book ‘Modern mobility, a question of switching’
ONTDEK ONS E-BOOK ROND SLIMME EN DUURZAME MOBILITEIT
DÉCOUVREZ NOTRE E-BOOK SUR LA MOBILITÉ INTELLIGENTE ET DURABLE
Do you have any questions about the tax system for mobility? Feel free to contact our Tax expert Frederik De Roo. Do you have general questions about the mobility of your organisation? BDO mobility expert Maxime Chalot will be happy to help you!