The advantages of cycling in the city cannot be counted on one hand. At the top are certainly the faster mobility, especially during rush hour, the preservation of the environment (no emissions are released), and the protection of one’s own health and fitness. In Germany, there is another advantage, namely the tax regulations associated with the service bicycle in the city.
Service bicycle taxation for private use in Germany – what does the law say?
Since 2012, the service bicycle in Germany has been treated for tax purposes like a company car. What does this mean in practice? You can use such a bicycle privately if you pay a monthly tax on the received allowance (for example, instead of a part of your salary). This is usually 1% of the gross list price of the service bicycle, i.e., the recommended retail price. If you used a service bicycle for the first time in 2019, you only have to tax half of the gross list price according to the 1-percent rule, from 2020 one quarter. You also have a tax advantage if you ride the bicycle to work – because these trips do not have to be taxed, unlike a company car.
Company bicycle in Germany and taxes – changes from 2019
Since January 2019, the following regulation applies in German tax law regarding company bicycles: If the service bicycle is provided in addition to the salary owed anyway, it remains tax- and contribution-free (§ 3 No. 37 EStG). However, if the provision takes place within the framework of a salary conversion, the so-called 0.25% rule applies. This applies if the bicycle was (or will be) made available for the first time between 2019 and 2030. This regulation should be particularly interesting for sole proprietors, as they do not have to declare and tax the private use as private remuneration. However, it is important to know that despite the tax exemption, you are entitled to the commuter allowance.
Service bicycle tax and commuter allowance – what is it?
In the annual tax return in Germany, it is possible to account for the daily commuting with the service bicycle through the so-called commuter allowance. You can claim 0.30 € per kilometer of one-way distance as advertising costs. This applies to:
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- actual working days,
● days when you ride your private bicycle to work.
If you generally like to ride a bicycle and prefer to use this mode of transport in the city, from 2022 you have the option to claim 0.38 € for each kilometer traveled, calculated from the 21st.
Service bicycle tax – lease or buy?
Many wonder what is better – leasing a company bike or buying a bicycle of their own? If it is a purchase, then the company benefits primarily – because the employer can definitely participate in the financing, even if he is not obliged to. Moreover, such measures are often used for marketing purposes – in times of climate change and heavily polluted air in cities, a responsible choice of transportation to work positively affects the company’s image and certainly increases its attractiveness as a workplace. Additionally, various expenses related to the company bicycle (acquisition, repair, or maintenance costs) can be claimed by the employer as operating expenses. However, it is possible to depreciate them over the next seven years.
Company bicycle and taxes – leasing installments for a bicycle
Leasing installments for the use of a company bicycle are fully tax-deductible as so-called business expenses. Many companies see this as an advantage in terms of:
- saving high running costs,
● enjoying greater flexibility. Leased bicycles can be exchanged at any time, for example, if you decide to change jobs. Moreover, the associated contracts often offer additional services such as insurance coverage. It is also worth knowing that any repairs and seasonal maintenance are usually included in the price. There are currently many providers in the market. Leasing contracts are generally concluded for a period of 36 months, which can be extended, or the bicycle can be returned at a favorable price.
Tax-free bicycles for employees vs. leasing – what to pay attention to?
If you decide to lease a company bicycle, your employer should become your lessee and cover the costs completely or participate in them in terms of partial salary conversion. However, if all rights and obligations from the contract are transferred to you, the bicycle is automatically no longer a company bicycle and the associated tax advantages are void. Be sure to conclude a written contract for the provision of the company bicycle, in which the most important points are precisely defined. If you want to buy back the bicycle at the end of the lease contract, purchase options should be agreed at the end of the lease contract, as they can change.
Tax-free bicycles for employees – summary
Referring to the above article on the possibility of being able to deduct the costs of a company bicycle for tax purposes, it is useful to know how the tax advantage can be calculated and how high the potential savings are. Various software and apps for tax refunds, such as the easy-to-use and very intuitive Taxando, which is based on the latest tax guidelines and can be used on both mobile phones and computers, help with this.
Maciej Wawrzyniak
In his private life, Maciej enjoys sporting challenges, playing the guitar, and swimming in the lake. He is also the proud father of three sons.
