On 23 January 2020, Belgium's Constitutional Court annulled a law of 30 March 2018 that introduced the so-called Cash for Car initiative, with retroactive effect from 1 January 2018.

The aim of the scheme was to encourage employees to make use of alternative mobility solutions instead of using company cars, thereby reducing traffic and its environmental impact.

The system allows employees to convert their (eligibility to a) company car to a cash allowance benefiting from a similar favourable tax and social security treatment.

The Constitutional Court decided to annul the Cash for Car initiative for two main reasons:

  1. The cash indemnity that compensates the benefit of a company car benefits from a more favourable tax and social security treatment than regular remuneration. Hence, it creates a difference in treatment between employees who are entitled to a company car (and can exchange it for cash) and employees who are not entitled to a company car. This difference in treatment cannot be reasonably justified and is therefore discriminatory.
  2. There is no guarantee that this measure can in fact reduce the number of cars on Belgian roads and make a positive contribution to the environment, public health and sustainable development.

Anticipating that the initiative's cancellation would create difficulties, the Constitutional Court decided that it will only become effective either when amending legislation has been implemented or by 31 December 2020, whichever is earlier.

The impact of the Constitutional Court’s judgment should be limited as recent studies have shown that only 0.011 per cent of eligible employees made use of it.

The so-called Mobility Budget, which came into force on 1 March 2019 and allows eligible employees to exchange their company car for a budget to be spent on three alternative mobility solutions, remains in force.

Find out more about the Mobility Budget and the introduction of the Cash for Car scheme in our blog.