Federal mobility budget: Total cost of ownership methodology clarified

A royal decree (Dutch | French) published on 29 September 2023 contains clarification from the Belgian government of the methodology to be used for the total cost of ownership (TCO) calculation within the framework of the federal mobility budget.

Legislation introducing the concept of the mobility budget (designed to allow employers to offer an alternative to employees entitled to a company car) was enacted in 2019 and amended in 2021. The mobility budget allows employees to exchange their company car for a more environmentally friendly car (pillar 1), a wide range of alternative mobility solutions (pillar 2), and/or a cash payment (pillar 3). The royal decree covers the TCO methodology for both the calculation of the total available mobility budget and the cost of the environmentally friendly company car within pillar 1.

The decree enters into force as from 1 January 2024 and does not affect individual mobility budget contracts in existence prior to that date.

Calculation of available mobility budget

As a general principle, the available mobility budget is based on the TCO of the individual company car to which the employee is entitled. Employers also have the option to use a reference car for each car category. This remains unchanged.

When calculating the TCO of the individual company car or the reference car, the royal decree specifies that, as from 1 January 2024, employers must either calculate the TCO of the company car based on the actual expenses or opt to apply the lump sum calculation formula. 

Actual costs basis

This formula considers the average of actual gross costs over four years of the company car which the employee will exchange (or to which the employee is entitled). If the car has been available to the employee for less than four years, the full period for which the car has been available to the employee needs to be considered.

The actual gross costs are the same types of costs as those considered for the environmentally friendly company car within pillar 1, i.e., all the costs related to the financing and use of the company car that are incurred by the employer and included in the company car policy. If the costs are not included in the company car policy, they cannot be taken into account.

Lump sum valuation basis

The lump sum formula is optional for the employer and includes a fixed and a variable component. Differential treatment applies depending on whether the company car is leased by the employer under an operational lease (renting), or via a purchase/financial lease. 

In both cases, there is a ″fixed″ component calculated as follows:

• Operational lease: The annual cost of the rental or leasing contract, the average over three years of other related costs that are not included in the leasing contract but are included in the car policy, the nondeductible VAT, corporate income tax payable on disallowed expenses, and the CO2 tax.

•  Purchase or a financial lease: 25% of the fiscal catalogue value (i.e., the value used for the calculation of the benefit in kind).

The “variable” component comprises a lump sum valuation of the costs related to commuting and private mileage (e.g., private mileage of 6.000 kilometres plus commuting distance for 200 working days)

Calculation of cost of environmentally friendly car within pillar 1

The royal decree defines the methodology for the cost calculation within pillar 1. As a general principle, the actual costs of the environmentally friendly company car need to be deducted from the mobility budget. Employers will now also have the option to apply a lump sum calculation method.

Actual costs basis

In line with the calculation of the available mobility budget, this formula consists of all the actual costs to finance an environmentally friendly company car and the related costs incurred by the employer and included in the company car policy. Again, if the costs are not included in the company car policy, they cannot be taken into account.

If certain costs relating to the environmentally friendly company car in pillar 1 are not known at the time the mobility budget is granted, the employer must determine the remaining budget for pillars 2 and 3 on the basis of its own estimate, to the best of its ability. As soon as the actual costs are known, they must be charged to the mobility budget.

Lump sum valuation basis

The lump sum formula to calculate the cost for the environmentally friendly company car under pillar 1 is identical to the calculation methodology for the lump sum component of the available mobility budget.

Options available to the employer

Employers have the option to decide to calculate the available mobility budget based on the lump sum calculation method, while deducting the costs for the company car within pillar 1 based on the actual costs (and vice versa).

The method chosen by the employer must be applied to all employees for a fixed period of three years. After three years, the employer may choose to change the calculation method, but this would apply only to employees opting in as from that date.

Deloitte webinar

For a more comprehensive analysis of what to expect in 2024 with detailed commentary and practical implications, register for our webinar “How to navigate through the Federal Mobility budget?” at 1 p.m. CEST on 23 October 2023.