date | theme

5 October 2021 | Financial benefits: employer’s obligation to pay?

23. November 2021 | Further education: Refund costs tax-free and contribution-free!

26. November 2021 | Deducting Study Costs from Tax: Advertising Costs vs. Special Expenses

30. November 2021 | Home office lump sum vs. home office: When should you deduct what as advertising costs?

18. February 2022 | Employer’s grants in kind to employees: bicycles and e-bikes are tax-advantageous? (this contribution)

Ecologically, it makes sense to bike to work. But how can it be assessed under tax law if the employer makes bicycles or e-bikes available to employees and can tax benefits result from these in-kind allowances? That is the question that we are addressing.

We have already published some contributions for employers and employees, in which we explain tax-optimized arrangements for employer contributions to the employee and explain clever deduction options for employees:

Of course, it is environmentally friendly when the employee goes to work by bicycle. Therefore, it is also the aim of the tax legislature to promote such behaviour. This is particularly the case with income taxes. On the other hand, VAT law is harmonised under European law by the VAT System Directive. Accordingly, the legislature cannot lay down comprehensive advantages there, as otherwise it would be exposed to the risk of a law contrary to EU law. As a result, the assessment of the bicycle assignment by the employer diverges in terms of sales tax law and income tax law.

The employee’s income tax is subject not only to wages, but also, according to § 19 (1) no. 1 EStG, to the “other advantages” he receives from the employer. If the employee is also allowed to use a bicycle provided to him for private purposes, this subsidy in kind naturally represents an advantage. Therefore, this is actually subject to the employee's income tax under § 19 (1) no. 1 EStG as "other advantage". Nevertheless, grants in kind in the form of the provision of a bicycle are tax-free according to § 3 no. 37 EStG. Consequently, the employee is not liable to tax the advantage.

Of course, employers and employees can also agree that the employee waives part of his wages for the use of the bicycle. Then the taxation on the part of the employee must be assessed differently. The tax exemption of § 3 no. 37 EStG does not apply in this case, since the advantage is then not provided in addition to the wages owed anyway. Rather, the in-kind allowances should be set at income tax. The monetary advantage of the employee is then 1 percent of the manufacturer’s non-binding gross price recommendation, rounded off to a full 100 euros. In the case of payroll tax, however, only a quarter of the price recommendation is taken into account.

The following example:

The employee receives an e-bike from his employee with a manufacturer price of 4,000 euros plus 760 euros sales tax. Then the monetary advantage is determined as follows: One-quarter of the manufacturer's price of 4,000 euros is to be set and rounded off to a full 100. Therefore, EUR 1,000 should be set. Of these, 1 percent makes up the monetary advantage. That's 10 euros. For these 10 euros, wage tax applies.

The employer may not deduct the expenses in accordance with § 3c (1) EStG in a profit-reducing manner if he leaves the bicycle next to the wage. If the employee waives part of his wages, at least the part for which the employee has to pay taxes can be deducted. In the above example, that would be 10 euros.

Employer?

The income tax advantage has no effect on the sales tax valuation. Therefore, the provision of the bicycle to the staff constitutes another service for remuneration within the meaning of § 1 (1) no. 1 sentence 1 UStG. Remuneration shall be presumed if the bicycle is to be regarded as remuneration for the services provided by the employee. This is the case if the transfer is regulated in the employment contract or is based on oral agreements or other circumstances of the employment relationship. This is always to be assumed if the bicycle is left to the employee for a certain duration and not only occasionally for private use. Then there is a so-called exchange-like turnover within the meaning of § 3 paragraph 12 sentence 2 UStG. Consequently, it is always a remunerated benefit regardless of whether the employee participates financially through salary waiver or co-payment.

The tax base is the part of the value of the bicycle that is not compensated by the cash wage. Co-payments by the employer, on the other hand, do not reduce the tax base.

In addition to the wage owed anyway, you can set a monthly average value of private use as 1 percent of the non-binding price recommendation at the time of commissioning. If, therefore, the employee from the previous example does not renounce his wages, then there is therefore an exchange-like turnover. The tax base then amounts to 1 percent x 4,700 (non-binding price recommendation 4,000 euros + sales tax 760 euros, rounded off to full 100 euros) = 47 euros; 47 Euro x 100/119 = 39.49 Euro. The sales tax on it is then 7.49 euros.

If, on the other hand, the employee waives part of his pay, the value of the service can be clearly determined in terms of amount in the amount of the cash wage reduction. Therefore, the above-mentioned 1 percent – method is excluded. Nevertheless, the minimum assessment situation according to § 10 paragraph 5 in conjunction with § 10 paragraph 4 no. 2 UStG must be observed. It shall apply where it exceeds the amount actually paid and shall be determined on the basis of the expenditure incurred to the extent that it has been deducted in full or in part.

In the example, the waiver is 50 euros. The regular assessment basis according to § 10 paragraph 1 UStG is then 50 euros x 100/119 = 42.01 euros. On the other hand, the minimum tax base is: 4,000 euros / 5 years (§ 15a UStG period) / 12 months = 66.66 euros. Therefore, the minimum tax base applies because it is higher than the regular tax base. The sales tax is therefore 12.66 euros.

Since the transfer of use to the employee is an entrepreneurial activity, the employer receives a VAT deduction according to § 15 UStG from the acquisition costs of the bicycle.

For the employee, the provision of the bicycle has no tax effects. It is usually tax-free. The employer, on the other hand, is affected by the non-deductibility of the expenses and a VAT burden. All this must therefore be taken into account in the calculation of a bicycle assignment.