Tax advisors recommend: A company bicycle as a tax benefit

Do you know that feeling? It’s early in the morning, and you’re stuck in traffic on your way to work—again. You’ve been waiting at the same traffic light for over ten minutes now. In that time, a cyclist has already passed you for the fifth time. Naturally, you start to wonder whether a “company bike” wouldn’t make much more sense for you than sitting in traffic all the time. As tax advisors in Düsseldorf
, we know that feeling. But when they think about the upfront costs, most people will still reach for their car keys the next morning. However, there are other advantages to a company bicycle, aside from the health benefits and greater flexibility in the city. With a company bicycle, you can save on taxes and even purchase your bicycle at a significantly lower cost. Interested? As your tax advisors in Düsseldorf
and Oberhausen,
we provide our clients with detailed information on all tax-related aspects, including those pertaining to company bicycles.

Difference Between a Company Car and a Company Bike

Some of you may already be enjoying the tax benefits of a company car. You probably don’t want to lose those benefits if you switch from a car to a bicycle. It would be unfair if you lost any benefits simply because your preferred mode of transportation changes. Legislators recognized this in 2012 and consequently extended the tax model for company cars to company bicycles.

What counts as a company bicycle?

There are essentially two types of company bicycles: A company bicycle can either be purchased or leased by the employer. The leasing model is the most commonly used and offers the most benefits, which is why we’ll focus on it below. When leasing a bicycle, the employer provides the employee with the vehicle for personal use. Employees are then only required to pay tax on 1% of the gross list price to use this bicycle. It should be noted that the term “company bicycle” does not mean that you are expected to use your new bicycle during work hours, as a mail carrier might, for example. The use of this company bicycle is intended for personal trips and the commute to work. In our example, our tax advisors in Düsseldorf or Oberhausen could thus not only avoid the heavy traffic on their way to the office but also enjoy the benefits of cycling in their personal lives.

Company Bike Tax Model

So what exactly are the tax benefits? First, users must pay taxes on the so-called “benefit in kind.” As mentioned earlier, for your company bike, this amounts to one percent of the gross list price.
The next aspect is that your gross income is reduced by the respective lease payment and the additional insurance costs for your bicycle as part of a salary conversion. This means less income is subject to taxation.
And the company bicycle offers yet another advantage over the traditional company car. Commuting is subject to additional taxation when using a motor vehicle. Company bicycles are generally exempt from this. On top of that, the commute can be claimed as a business expense. You can claim 30 cents for every kilometer of your commute. While this also applies to a company car, the absence of fuel and maintenance costs—especially with a bicycle—quickly adds up to a significant amount. We would be happy to provide you with a specific calculation example. Schedule an appointment with your tax advisor in Düsseldorf or Oberhausen.

The Success Story of Company Bicycles

There are over 250,000 company bicycles on German roads. The concept is booming, and the trend is rising accordingly. This positive trend will continue in the future because both employers and employees recognize the benefits. Even today, more and more businesses are adapting to the new wave of company bicycles. Some of them have already designated special parking spaces and e-bike charging stations at the workplace—or have installed them for their own employees.

Conclusion

The concept of the company bicycle is a growing and equally beneficial topic for both employees and employers. If you, as an employee or employer, are interested in this topic and have specific questions about whether and how a company bicycle would benefit you from a tax perspective, please feel free to contact us. As your tax advisor in Düsseldorf and Oberhausen, we’re happy to assist you and provide professional guidance on implementing your plan.

UPDATE: 2019
Legislative Change

A legislative change regarding company bicycles takes effect on January 1, 2019. This change makes the company bicycle even more attractive. Under the new regulation, the 1% rule for the monetary benefit no longer applies. This means it is even more cost-effective to have your employer provide a company bicycle. The new tax exemption is regulated in Section 3 No. 37 of the Income Tax Act (EstG).