In our article on the tax plans 2019 We have already touched upon the new rules for company bicycles. In this article, we set out the details of the new scheme. Subject to Parliament’s approval, the new rules will come into force on 1 January 2020.
Additional tax liability 7%
The key feature of the new scheme is that, for a bicycle made available to an employee, 7% of the bicycle’s new value is added to their salary each year. The personal contribution paid to the employer for private use may be deducted from the additional tax liability (up to a maximum of the amount of the additional tax liability). This refers to the personal contribution paid from the employee’s net salary. Costs paid to third parties, such as the costs of charging an e-bike at home, may not be deducted from the additional tax liability.
The additional tax liability may be included by the employer within the discretionary allowance under the work-related expenses scheme. Provided that the maximum limit of this discretionary allowance is not exceeded, no payroll taxes are payable. On the amount by which the maximum limit is exceeded, the employee pays payroll taxes in the form of a final levy at a rate of 80%.
Make available
The annual tax allowance under 7% applies only to bicycles made available to the employee by the employer. This means that the employer purchases the bicycle and makes it available to the employee for their use. The employer remains the owner of the bicycle.
Where the employer provides the employee with:
- pays a cash allowance towards the purchase of a bicycle;
- transfers ownership of the bicycle to the employee;
In this case, the bicycle is not being made available to the employee, and the additional tax liability scheme cannot be applied. The full amount of the allowance is then subject to payroll tax. Where the employee becomes the owner of the bicycle, the invoice value of the bicycle (minus the amount paid by the employee) is treated as taxable remuneration.
Of course, the employer can also include these benefits within the discretionary allowance under the work-related expenses scheme. However, the (much) higher value of the benefit means that the maximum discretionary allowance is quickly exceeded.
Business use
The additional tax liability applies only if the bicycle is also used for business purposes. If the employee cycles (part of) their journey to and from work, this is regarded as business use.
The employer must therefore demonstrate that the employee uses the bicycle for business purposes. If not, the actual value of the private use of the bicycle made available to the employee must be included in their wages.
Bicycle
The definition of a bicycle must be derived from common usage. However, the explanatory notes to the bill explicitly state that the additional tax liability also applies to electric bicycles, cargo bikes and similar vehicles. Even a so-called ‘speed pedelec’ is explicitly classified as a bicycle. A speed pedelec is a bicycle with electric pedal assistance, for which a moped registration certificate must be issued.
Canteen scheme
The most obvious scenario is that the new scheme will primarily be used in conjunction with a cafeteria scheme. This is the term used to describe the exchange of a gross salary component for a (nearly) net benefit. Such a scheme is (virtually) budget-neutral for the employer, whilst the employee sacrifices far less in net pay than they gain (the bicycle).
Of course, you need to structure a cafeteria scheme properly. We We’d be happy to help you with that.
Entrepreneur
An entrepreneur who includes a bicycle in the company’s assets must add 7% of the bicycle’s new value to their profit for private use. The same applies to a person receiving income from other activities. Both the business owner and the person receiving the income must demonstrate that the bicycle is used (at least in part) for business purposes. After all, a bicycle used exclusively for private purposes cannot be classified as business assets or income assets.