Rethink your mobility strategy and reduce your CO2 emissions today

The classic car policy is doomed. Talent works more flexibly and therefore expects customized mobility solutions. Moreover, the tax incentives for company cars with a classic combustion engine are disappearing. "So it's high time to work out a sustainable, future-proof mobility policy," is a statement that is agreed to by Olivier Vanneste, Reward Expert at KPMG in Belgium and Séverine Kerkhove, VAT Specialist at KPMG in Belgium.

"The reform of company car taxation has woken up many companies," Olivier states. "The government is fully committed to electrification and the mobility budget, which also includes alternative means of transport, such as electric bicycles and public transport. From 2026, only fully electric cars will be tax deductible. Non-emission-free company cars, even hybrid cars, will then fall under disallowed expenses. Of course, companies have been working on sustainability for some time, and today they see opportunities to reduce their CO2 emissions. A greener fleet immediately means healthy CO2 reduction figures."

"From a VAT point of view, there are no specific rules for introducing a mobility budget," explains Séverine. "A coherent approach from lawmakers is still lacking, and this can give rise to more complexity."

The issue of company cars is still very sensitive for the average Belgian. "There are some one million company cars driving around on our roads. But structurally-anchored working from home and longer traffic jams mean that more and more employees want to trade in their company car for a mobility solution that better suits their needs," Olivier says.

"In the war for talent, the right mobility policy can make the difference. The condition is that employees are encouraged to switch to alternative mobility. If that succeeds, we achieve a win-win: companies reduce their car fleet and employees benefit from a better mobility solution. In addition, traffic congestion goes down, as do CO2 emissions."

"Are companies switching to a more flexible mobility policy? Then they should ideally approach this change from the perspective of the total cost of ownership (TCO). The TCO is the real annual cost of a company car, including financing cost, corporate tax, non-deductible VAT, CO2 contributions and refueling or charging," says Séverine.

"The TCO offers companies a solid basis for calculating an employee's mobility budget. Take the example of a company car with a TCO of 10,000 euro per year. Employees can trade that in for an environmentally friendly car of 5,000 euro, an electric bicycle lease of 2,000 euro, 1,000 euro in train tickets and a payout of 2,000 euro per year."

"The mobility budget had quite a few teething problems in its first years and was therefore not popular with employers and employees," Olivier acknowledges.

"Since the beginning of 2022, the mobility budget is a lot more flexible and extensive. For example, it includes more sustainable options, such as tickets to public transport for resident family members. That makes it an attractive option now."

"As part of the electrification of the vehicle fleet, the VAT Administration recently addressed the issue of electric charging stations through a published commentary. A major concern for the employer is the right to deduct VAT when installing electric charging stations," explains Séverine. "In the company parking lot, a charging station can be 100% deductible, but for a charging station at the employee's home, one must look at the professional use of the car. The electric consumption of the company car via a home charging station can be established separately via a badge or PIN. The employee can pass on these costs, the amount including VAT. Under the current system, the employer cannot deduct this VAT. We are looking forward to a possible technological or legislative solution. But this is not for the foreseeable future."

"In the meantime, the mobility budget also offers a lot of opportunities for employers," Olivier says. "Do they know how to develop a system that rolls out the right mobility solution for each employee? Then they not only have a head start in the labor market, but they also build their CO2 reduction and their reputation towards other stakeholders – think customers, governments and investors. And all for the same price as a traditional car policy."

"Many companies today are addressing the mobility issue. They are enthusiastically offering – or want to offer – more flexibility to their employees and are building a more sustainable organization," Olivier emphasizes.

"The solutions that organizations are coming up with are sometimes still limited. For example, some employers are completely electrifying their fleets, without offering alternatives. Other companies take a more strategic approach. That seems to us to be the optimal approach: what a company needs in the long term must fit into a modern mobility policy. It is best to start from the core. What is the company's strategy, what does it want to achieve and what social impact does it want to make in society? What are the pain points, frustrations and needs when it comes to mobility? And what are the fiscal and legal concerns?"

"It is clear that this is a multidisciplinary issue," Olivier concludes. "Taxation and accountancy, social law and HR and IT and technology: on the route to a modern mobility policy, we pass all these domains. Imagine if your payroll department had to manually register every change for every employee. This is very tedious work. A system that streamlines and automates this process is the crucial lever for the success of such a change. Those systems exist, and fit seamlessly with the cafeteria plans employers are offering today."

KPMG can guide your company to the right mobility policy, using a multidisciplinary approach.