More information on the bike tax benefit
How does the new cycling tax work?
The cycling benefit basically means that the employer either purchases or leases a bicycle for an employee's personal use. The employer is responsible for purchasing or leasing the bicycle as well as for the maintenance of the bicycle. A leasing contract is an easy way to get the bicycle.
The employee bike is tax-free up to 1 200€ per year.
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More details and calculations of the cycling benefit in practice:
When you get paid 100 euro from your employer the first thing your employer has to do is deduct the tax. This is based on your tax percentage which is based on your total amount earned per year. The tax percentage is normally between 20 – 36 % and on average is around 25 %. Let’s use 25 % for this calculation. So for this example we deduct 25€ (25 %) of the 100€ and this is used to pay
the local and income tax. So now you have 75€ left.
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The next thing your employer must do is to deduct the Pension cost. This again varies from individual depending on the pension plan but on average is 7.45 %. If we use this average then we deduct a further 7.45€. So now you have 67.55€ left.
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Finally your employer deducts unemployment insurance which is approx. 1.4 % so a further 1.4€. So now we are left with 66€. This is the amount the employer will pay into your bank account. So in this example you can see that 34% or 34€ of your 100€ was paid to taxes and contributions.
With the new cycling tax benefit if you request that instead of the 100€per month salary payment you will instead receive a bicycle benefit for the value of 100€ per month. The bicycle benefit is tax exempt so you do not need to pay the income tax, pension contributions or unemployment insurance so you can receive the full 100 euro towards your bike. If this 100€ per month is looked at over 4 years then that it a total of 4 800€ .
The value of the cycling benefit:
If you want to take advantage of this then You can agree with your employer that you will take a 100€ reduction in salary and instead take advantage of the cycling benefit. If you employer agrees then you can choose which bike you would like to purchase and the usual model is that the employer then leases that bike for 100€ a month. Note that the bike lease contract is in the employers name.
If the bike’s value is 2 400€, the lease lasts 24 months and if the value is 3 600€, the lease lasts 36 months. The maximum is normally 4 800€. If the bike is more expensive than that, it can be agreed that the employee pays the extra amount.
At the end of the lease period it is normally agreed that the employee has the right to buy the bike from the lease company for a nominal fee. This is normally 100 €. At this point the bike ownership moves from the leasing company to your ownership.
How much do you benefit?
So in summary the new tax benefit is basically giving you 34% discount on a new bike while at the same time allowing you to purchase a bike without having to outlay any of your hard earned cash. If we take the example of a bike that costs 4 000€, you would save 1 156€.
You save money on the bike, you get a bike which will improve your health, reduce carbon emissions and be a new fun way to get around.