No lump sum valuation of mobile phone benefits

In our newsflash of 7 December 2009, we announced the approval of a draft Royal Decree by the Council of Ministers relating to the valuation of the benefit in kind for the private use of mobile phones (cell phone, Blackberry etc.) granted by the employer. The government has, however, recently reconsidered its decision and withdrew the draft Decree.

No lump-sum valuation…

For the record, the draft Royal Decree aimed at introducing the lump sum valuation (12.50 EUR/month) of the benefit in kind resulting from “the use, for personal purposes, of a mobile phone provided by the employer or of which the employer (partly) bared the purchase cost”. The real value of the benefit in kind would have, however, been taken into account if the employer has “a system which allows for a clear distinction between the personal and professional use of the device.”

The approval of this Royal Decree caused many indignant reactions relayed by the press. The Council of Ministers has therefore definitively revoked it. Deputy-Prime Minister and Minister for the Budget Guy Vanhengel explains this decision by the government’s wish not to further increase the burden of employment charges and by the fact that the intended measure would have called for a “gigantic control mechanism”. According to Vanhengel, cell phones have now become, like pen and paper, essential work instruments.

… but still a benefit !

Press reports recently published over this withdrawal could lead one to believe that providing free cell phones to employees would never imply the payment of social security contributions. However, if a mobile phone provided by the employer is considered as a work instrument when used for professional purposes, it is nonetheless a benefit in kind to be taken into account for the calculation of social security contributions when it is also the object of private use. If no lump sum valuation can be applied, the real value of the benefit in kind must be taken into account according to the general valuation principles.

In practice, during an inspection, social security authorities always verify if a mobile phone provided by the employer is also used for private purposes. If this can be established, the corresponding benefit is regularized and a discussion follows regarding the actual amount of the benefit.

Although questionable in some aspects, the draft Royal Decree did reduce legal uncertainty through the use of a lump sum valuation. In this context, the (political) decision to withdraw the draft Royal Decree is more bad news than good news.

The draft Royal Decree only provided for valuation rules for social security purposes – it did not address the tax treatment of the benefit. As regards tax treatment, we refer to the Tax Alert published by Deloitte Tax.

It must be noted that, contrary to the tax treatment of the private use of company cell phones, it is not possible to conclude a lump sum valuation agreement with the national social security office (ONSS/RSZ).