State Secretary van Rij reports a simplification of the administrative rules governing company bicycles. This simplification will be included in the next edition of the Payroll Tax Handbook.
Company bike
The simplification relates to the bicycle scheme introduced in 2020. This scheme concerns bicycles made available to employees by their employers (the employer retains ownership of the bicycle, which the employee is permitted to ride). For the private use of such a bicycle, an additional tax liability of 7% of the (catalogue) value of the bicycle must be included for payroll tax purposes.
The scheme has already been made more attractive following approval of the residual value that may be applied when an employee takes ownership of the bicycle. See our article Residual value of a leased bicycle.
Travel reimbursement
Although the employee has been provided with a bicycle to cover (part of) their journey to and from work, the employer may also pay a tax-free allowance for kilometres travelled to and from work using other private transport (up to a maximum of €0.21 per kilometre). However, the employer must be able to prove on which occasions the journey was actually made using other private transport. This proof places a considerable administrative burden on the employer.
For the purposes of this proof, reference may now be made to the agreements made between the employer and the employee in this regard. The passage to be added to the Payroll Tax Handbook states this as follows: “The agreements made between the withholding agent and the employee regarding the number of travel days using the company bicycle and another means of transport may form the basis for determining the tax-free travel allowance for the days on which another means of transport is used, provided that the agreements are sufficiently realistic and are tailored to the employee’s personal circumstances. An occasional deviation from this need not lead to an adjustment of the allowance. An employee is no longer deemed to use the other means of transport ‘as a rule’ if they have not done so for more than two months. This assessment is made on a case-by-case basis (such as leave, training, sickness) and on a calendar-year basis. If the reason extends beyond the calendar year, it is considered a new reason.”.
Redundant
The decision memorandum accompanying the letter to Parliament shows that, during consultations with Van Rij, the cycling sector also requested permission to reimburse €0.21 per kilometre tax-free for all commuting, in addition to the bicycle provided by the employer. After all, employees who cycle (part of) their commute would have to forfeit the tax-free allowance, should they receive it for this purpose, and would regard this as a reduction in their income. However, using a company bicycle and receiving a tax-free allowance would amount to double compensation, so Van Rij has not granted this request.