Sustainable mobility is gaining importance in employee remuneration packages, especially in the current war for talent. Employers who want to stimulate green mobility or flexibility in car policies can offer their employees the flexibility of renting a car for a short period of time. This allows the employee to opt for an electric or smaller company car and to rent a different car for a short period of time whenever they need a bigger - or other type of car - for private purposes.
The question is how this short-term car should be treated from a tax and social security perspective? Is it possible to apply the standard lump-sum benefit-in-kind as applicable for a standard company car?
Short-term rentals as a benefit
The ruling commission recently approved a ruling we filed for one of our Reward Practice clients. The client will offer short-term rental cars as one of the benefits of their Flexible Reward plan. However, a couple of conditions must be fulfilled in order to receive beneficial tax and social security treatment:
- A short-term rental car can be offered for a short, limited period (maximum 30 days per year).
- The employer concludes the leasing or rental contract and puts the car at the disposal of the employee. It is not possible for an employee to conclude the contract with the rental company and ask for reimbursement of the costs afterwards to gain from the beneficial tax treatment.
Tax & social security treatment
A benefit-in-kind can be calculated according to the normal lump-sum valuation for company cars as determined by Belgian legislation, which will be subject to Belgian individual income tax rates. The lump-sum valuation is based on a couple of factors:
- catalogue value of the car including options and accessories,
- date of registration,
- engine type (diesel, petrol, electric)
The minimum annual benefit-in-kind amounts to EUR 1,370.00 (2021). No deviation from this calculation is granted in the ruling. The benefit-in-kind should be calculated based on the actual rental car, on a pro rata basis per calendar day. In practice, it's sometimes difficult to obtain the correct data to calculate the correct benefit-in-kind.
Short-terms cars in practice
In the ruling, a distinction is made between two different scenarios. The first scenario considers the situation where a short-term rental car is put at the disposal of the employee in addition to the regular company car. In this case an additional benefit-in-kind should be calculated on top of the normal benefit-in-kind.
The second scenario discusses the situation in which the employee parks the regular company car on the parking lot of the company or hands the car back to the leasing company and gives back the keys during the period that the short-term rental car is put at his or her disposal. Only the benefit in kind for the short-term rental car has to be taken into account during this period, the benefit-in-kind related to the regular company car can be suspended.
This benefit for the short-term car is not subject to employee social security, but the standard special contribution for the employer is still calculated on the CO2 rate.
Finally, a short-term rental car can also be provided in the framework of the second pillar of the federal mobility budget. When the short-term rental car (maximum 30 days) is provided in the second pillar, there is no benefit-in-kind in any scenario. This has been confirmed in the FAQ about the mobility budget.
The administrative process can be simplified by working with a limited list of short-term vehicles, as this results in a simplification of the ordering process and the payroll administration (limited number of benefits-in-kind). A strong framework for the implementation of short-term cars consists of good communication towards employees, a short-term car policy, and insurance.
The short-term car is an attractive option to add to a flexible mobility and / or reward plan, although there are a number of practical, legal and tax considerations. The short-term car has been included as a standard module in the KPMG Flex Reward Tool. The KPMG Reward Experts can help you with the implementation of this option and further adaptation of this tool to your needs.