Conditions right for bike and employee
With temperatures on the rise and facemasks probably remaining mandatory in public transportation for some time to come, an (electric) bicycle can be an attractive alternative means of transportation for employees when commuting. That is, when we are all allowed to return to our offices for work, of course. Moreover, cycling to work is a healthier choice both for our body and mind. What options in terms of taxation do you have to encourage employees to get to work by bike?
Taxwise, there is a difference between your organization reimbursing the expenses on a bike, purchasing a bike for employees or providing (i.e. make available for use) a bike to employees. If your organization opts to provide a bike to employees, 7% of the recommended retail price should be added to the employee’s taxable wages for private use of the bike; except if the employee is prohibited from using the bike for private reasons. For example: you provide a bike worth € 1,200 to an employee which (s)he can also use for private reasons. In that case, you must add an annual amount of € 84 (i.e. 7% x € 1,200) to the employee’s taxable wages. This equals € 7 per month.
If your organization instead opts to reimburse employees for buying a bike themselves or if the organization opts to purchase a bike for its employees, there are three options: you add the amount reimbursed or paid to the employee’s taxable wages; you gross up the amount, so that the employee keeps the net amount spent on the bike; or you include the amount in the ‘vrije ruimte’ (budget for tax-free allowances and benefits). If you reimburse (part of) the expenses on a bike bought by an employee him-/herself, then the amount reimbursed must be used. If the bike is purchased by your organization, the invoice value of the purchase or the value of the bike in the course of trade must be used. Any financial contribution made by the employee can be subtracted from this.
Interest-free loan remains free of tax
It can be a tax-friendly option for your organizations to provide and interest-free loan to an employee to buy a bicycle and have the employee pay back the loan by giving up a tax-free allowance. The most logical choice for this would be the fixed travel allowance. The purchase of the bike will then not affect the ‘vrije ruimte’ (budget for tax-free allowances and benefits): the employee buys the bike and the loan provided by you does not count as an employee benefit.
After all, the employee must pay back the loan. This can be done by giving up the fixed travel allowance.
You can pay an employee an allowance per kilometer for business trips or commutes made by bike if the bike in question isn’t owned by your organization. The employee can then use this allowance on e.g. maintenance of the bike. A tax-free allowance of max. € 0.19 per kilometer is permitted. The allowance must be declared as ‘eindheffingsloon’ (wages subject to a final levy). If a higher allowance is paid, the excess amount will be subject to regular payroll tax. The excess amount must then be added to the employee’s taxable wages or it must be included in the ‘vrije ruimte’ instead.
During a business trip or commute, an employee may also use another means of transportation in addition to a bike. For example, the employee cycles to the railroad station and then continues the commute to work by train. If you want to compensate the employee for the entire commute, you can pay him/her a tax-free allowance of max. € 0.19 per kilometer covered by both bike and train. Another option is to pay an allowance for the portion commuted by bike and to reimburse the actual expenses of the portion commuted by train (i.e. the expenses on a train ticket).