Mobility budget – the calculation formulas have been confirmed!

Further to their announcement in 2021, we have been expecting the formulas to calculate the mobility budget. A Royal Decree now determines the two formulas – real or fixed rate. These methods will be enforced on 1 January 2024. Here’s a quick tour of these two calculation methods.

Mobility budget: brief reminder

The mobility budget is a budget offered to workers with a company car or entitled to one. This budget corresponds to the total cost of the car (also known as Total Cost of Ownership – TCO) relinquished by the employee and may be spent across three columns:

1. A car that respects the environment (same social and fiscal approach as a ‘traditional’ company car).
2. Sustainable methods of transport (exempt from PP and social security contributions)
3. The balance paid in cash (contribution of 38.07%)

Real car or reference vehicle

Although not referred to in the Royal Decree, the report to the King informs us that it is still possible to use reference vehicles based on the function category. When combined with the fixed-rate method, this simplifies the use of the mobility budget. The decision to apply reference vehicles is also valid for three years.

Choice between the formulas

Until now there was some uncertainty when determining the size of the mobility budget. Which elements should be taken into account in the TCO of the company car relinquished by the employee? How should the cost of fuel be calculated?

Now, the Royal Decree proposes two formulas: one based on real costs, the other on a fixed rate. The employer may choose between these two methods, on the one hand, to calculate the available budget and, on the other hand, to determine the costs of the column-1 car. An employer may therefore choose two different methods: for example, using the fixed method for the mobility budget and applying real costs for the column-1 car. This choice is valid for 3 years.

The same choice must be applied to all employees. However, if the employer opts for the method based on real costs, this is not applicable in certain cases. For new employees, employees who change role or those who do not actually have a company car, the fixed-rate method can be applied (since there is no real cost to refer to in this case).

Evaluation of real costs

The formula is the same, whether you decide to calculate the mobility budget amount or to use the car in column 1. However, for the budget, account is taken of the gross annual average cost from the last four years, whereas for the column-1 car, the rate of the year in question is used.

The Royal Decree states the complete list of costs to include when using the real evaluation method. This list includes the cost of financing or leasing the car, fuel costs (including electricity), various car charges (parking, car wash, etc.), and applicable taxes and contributions.

However, costs are only counted once. For example, if the costs of fuel are already included in the leasing, they are not included again.

Also, it is only possible to include costs that are covered in the company car policy. Company car policy refers to the set of rules governing the conditions for granting and using the company car in the company, regardless of how such rules are set.

Fixed rate evaluation

By definition, the real cost of a column-1 car can only be properly determined over the course of the year. It is impossible to know exactly how many kilometres the employee will drive and the true costs relating to the company car at the start. Furthermore, for employees without a company car, the method to establish the mobility budget based on real costs is of no use at all.

Therefore, the Royal Decree anticipates a fixed-rate evaluation method to anticipate a flat rate for fuel by determining in advance the number of kilometres travelled for private purposes and for the journey to and from work. This method presumes that the employee will do 6,000 kilometres for private purposes and will travel to work 200 days a year (taking into account the distance between the employee’s home and work address).

The cost of fuel consumption per kilometre is based on the kilometre allowance at the time of the calculation. If the mobility budget is calculated in this way, future indexations of the kilometre allowance will not affect the calculated budget. For the car in column 1, account is taken each year of the cost in force at the start of the year.

The formula to calculate the fixed rate is actually twofold. There is a formula for the leased car based on the cost of leasing and another for the car purchased by the employer based on the list price of the car.

By combining this method with the use of a reference vehicle, it is easier to establish the rate of TCO of the car relinquished by the employee, and thus the mobility budget. The employee will also immediately know exactly how much budget can be spent in column 2 and 3 when embarking on the mobility budget.

Calculation of mobility budget

To calculate the mobility budget for each employee, the employer can therefore apply the fixed rate or real cost, depending on the choice the company has made.

Then, if the employee pays a personal contribution for private use of the company car, this contribution will be deducted from the mobility budget amount. So, this contribution effectively reduces the cost of the car for the employer.

The employer may also deduct business expenses relating to the company car from the mobility budget, provided these expenses are also compensated on top of the budget. This only applies to fuel costs for business travel.

It should also be noted that the annual mobility budget must be between 3,000 and 16,000 euros and may not exceed 1/5th of the employee's total gross pay.

Calculation of the car column 1

Employers who opt for the fixed-rate method to calculate the car column 1, will charge the TCO of this car directly to the mobility budget and the employee will immediately know the amount that can be spent in columns 2 and 3.

Employers choosing to calculate the TCO of the column-1 car based on real costs must first estimate the costs that are still unknown when the budget is awarded, in order to determine the budget still available in columns 2 and 3. As the year passes, the real costs will be charged to the budget and the employee will get a more precise indication of the amount of budget remaining.

What to do now?

If you already have a mobility budget, contact Legal Partners to check whether it complies with the new Royal Decree.

Were you waiting for more clarity to get started? Set up a mobility budget right away!

Source: Royal decree of 10 September 2023 implementing articles 8, § 5, and 12, § 5, of the Act of 17 March 2019 on the introduction of a mobility budget, and amending the Royal Decree of 21 March 2019 implementing the Act of 17 March 2019 on the introduction of a mobility budget, M.B., 29.09.2023.

Act of 17 March 2019 on the introduction of a mobility budget, M.B., 29.03.2019.