Tax Incentives to Give up Company Cars

To address increasing traffic and associated pollution, the Belgian government has introduced the so-called “Cash for Car” program.

The measure aims to encourage employees to exchange their company cars (one of the top three most popular employee benefits in Belgium) for a tax-efficient cash allowance to be used for alternative means of transportation to work. The program is voluntary for both employers and employees.

Comment

Although the mobility allowance represents a good value as a tax-efficient alternative to a company car, it appears from initial estimates that both employers and employees are reluctant to give up their company cars. In particular, employees who travel long distances are unlikely to benefit financially from choosing the mobility allowance.

However, a second measure, the so-called “mobility budget,” is expected soon and may prove more popular. Although the two measures may seem similar, the mobility budget would allow employees to trade their current car for a smaller, more environmentally friendly one, in addition to a bicycle, a public transportation pass, or cash.

Written by Alexander Vandenbergen of Lydian and Roger James of Ogletree Deakins