What happened to the cash for cars system?
On 23 January 2020, the Constitutional Court annulled the cash for cars system implemented by the Act of 30 March 2018.
The cash for cars system enabled employees to have the possibility to exchange their company cars for a mobility allowance. This mobility allowance is subject to a beneficial social security and income tax treatment and was aimed at reducing the number of cars on Belgian roads. From a social security perspective, a solidarity contribution (equal to the CO2 solidarity contribution for the traded-in company car) is due.
A number of trade unions and climate organisations had submitted an annulment request before the Belgian Constitutional Court.
What is the impact for an employer?
It should be noted that while the judgment annulled the cash for cars legislation, it maintains all consequences of the legislation until the time a new system comes into force, or at the latest on 31 December 2020. For employees currently covered by the system, one can thus merely continue the system for a couple of months until the moment there is more information on whether or not a new system will be introduced.
- Will a new legislation be introduced ? It remains indeed to be seen whether a new system will be introduced in the course of 2020. The Constitutional Court considered that the government can, for environmental reasons, aim to reduce the number of kilometres driven by company cars, but its reason for annulling the cash for cars system was on the basis that there was no link between the transportation means used and the company car. The Constitutional Court pointed out that under the cash for cars system, an employee could in effect renounce a company car, yet purchase his own car and drive the same number of kilometres with this private car. The Constitutional Court considered that this was a violation of the principle of equality - as an employee receives under the cash for cars system a part of his remuneration under a favourable tax and social security regime, whereas a comparable employee not covered by the cash for cars system has to pay the normal taxes and social security contributions on his full remuneration, without the invoked environmental reasons justifying this difference in treatment. The government could thus introduce a new cash for cars system, one that will take into account the considerations by the Constitutional Court, notably, by ensuring there is indeed an environmental impact - for instance by requiring that the cash amount is only used for environmental friendly purposes (public transportation, electric cars, etc.).
- The legislation on the mobility budget remains applicable It is also important to bear in mind that the Act of 30 March 2018 concerning the introduction of a mobility allowance is distinct of the Act of 17 March 2019 concerning the introduction of a mobility budget. The latter Act allows to introduce a mobility budget, which has a favourable tax and social security status, which the employee can then use for environmentally friendly transportation means (an electric car, public transportation, an electric bicycle, etc.). The Constitutional Court did in its judgement of 23 January 2020 only deal with the Act of 30 March 2018, hence the abolition of the cash for cars system, provided by this Act on 1 January 2021 does not affect the mobility budget under the Act of 17 March 2019.
- The possibility of negotiating a new addendum to the employment contract For the employees currently making use of the cash for cars system, the best option, in our view, is to have these employees sign a new addendum to the employment contract cancelling the agreement that makes use of the cash for cars regime and setting out the terms that will be applicable in the future.
This addendum could be a return to the situation before the cash for cars regime was introduced, i.e. that the employee will again be provided with a company car and that the cash payment under the cash for cars regime will end.
An alternative is to reach an agreement whereby a mobility budget in the sense of the Act of 17 March 2019 is introduced.
If new legislation replacing the cash for cars regime would be introduced, the addendum to the employment contract could make use of this new legislation.