Context

As you may know, the Individual Income Tax Reform of 10 August 2001 (see our Tax Newsletter – Issue 12 – February 2002 *) materially modified the tax treatment of employer’s indemnities paid as a reimbursement of commuting costs. For employees whose business expenses are fixed on a lump-sum basis in accordance with article 51 of the ITC, such indemnities will be wholly or partly exempt from tax depending on the transport mode.

In short:

Public Transport: Full Exemption;
Collective transport organised by the employer (or a group of employers): Exemption up to the price of a first-class train season ticket;
Others: Exemption up to EUR 150.

In addition, the exempt amount for one transport mode may be cumulated with the exempt amount for another transport mode. Finally, needless to say that the benefit arising from the use of a collective transport organised by the employer remains a tax-free social benefit.

News

The tax authorities have now clarified the scope of the new tax treatment of commuting indemnities in a Practice Note of 18 July 2002 ( Ci.RH.241/550.265). This note provides for a plethora of useful examples and guidelines clarifying the withholding tax and reporting requirements applicable to such indemnities. Also, we noted that the Practice Note defines the concept of collective transport organised by the employer in a very broad way. In fact, private cars and company cars that are used for car-pooling organised by the employer qualify as such. As a consequence, the benefit in kind arising in the hands of an employee for the kilometres he runs with a company car between his home and working place with a colleague is regarded as a tax-free social benefit if such car-pooling has been organised by the employer. Indemnities paid for the use by an employee of his private car will be tax-exempt in his hands up the price of a first-class train season ticket to the extent that he car-pooled and provided such car-pooling was organised by the employer.

* Tax newsletter nr 12 : http://pwcglobal.com/be/eng/main/tax_newsletter/edition12/pwc_taxnewsletter12.pdf