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This article describes the regulations that must be adhered to in terms of payroll accounting for the job bike scheme, which is currently covered by legislation until 2030.

What is the company bicycle or bike-to-work-scheme?

If an employer provides an employee with a bicycle, this is generally referred to as company bicycle provision. If the employee makes use of this provision, it may result in benefits in kind that must be taken into account in payroll accounting. 

If the bicycle becomes the property of the employee at some point in the future, this may also affect their tax and social security contributions. 

Note
Any regulations that may need to be observed regarding VAT are not covered here.

Contractual Options for Bicycle Provision

Different contractual arrangements can be used to acquire the bicycle and then make it available to the employee. There are essentially two options:

 

Option 1: Direct purchase of the bicycle by the employer

Here, the employer purchases the bicycle directly from the manufacturer or retailer, thus becoming the beneficial owner of the bicycle. The employer then hands the bicycle over to the employee for their private use. 

 

Option 2: The employer acquires the bicycle via a leasing contract

In practice, the leasing model is generally used. At the request of the employee, the employer enters into a contract with a lessor (service provider), generally for a period of three years. The employer is thus both the lessee and the contractual partner of the lessor. The employer allows the employee to use the bicycle for the duration of the leasing period.

Whichever option is used, it is advisable to set out the terms of the arrangement in a contract. If the employee contributes to the cost of the bicycle via deferred compensation, this must be documented in a deferred compensation agreement.

Bicycle categories and their tax and social security implications

All company bicycles can be classified into one of three different categories. Each category and type of financing has different tax and social security implications.

 

Bicycle categories

• Classic non-electric bicycles
• Pedelecs (electric bicycles up to 25 km/h, motor up to 250 watts) that do not require license plates or insurance
• S-Pedelecs (faster than 25 km/h, motor rating over 250 watts) that require license plates and insurance

 

Tax and social security implications for each category

Bicycle financing	Classic (non-electric) bicycle	Pedelec (electric bicycles, registration not required)	S-Pedelec (electric bicycles, registration required)
By the employer only (the bicycle is provided in addition to the already agreed salary)	No income tax or social security contributions	No income tax or social security contributions	Income tax and social security calculation of 1 % of 25 % of the recommended retail price rounded down to the nearest €100.00; plus 0.03 % of the recommended retail price rounded down to the nearest €100.00 per kilometer of distance between the employee's home and place of work
Through an employee salary waiver (deferred compensation, also with mixed financing)	Income tax and social security calculation of 1 % of 25 % of the recommended retail price rounded down to the nearest €100.00	Income tax and social security calculation of 1 % of 25 % of the recommended retail price rounded down to the nearest €100.00	Income tax and social security calculation of 1 % of 25 % of the recommended retail price rounded down to the nearest €100.00; plus 0.03 % of the recommended retail price rounded down to the nearest €100.00 per kilometer of distance between the employee's home and place of work

Example calculations

An employee is employed by the employer for a monthly salary of €4,000.00. They live 5 km from their place of work.

 

Example 1

At the request of the employee, the employer enters into a contract with a leasing company for an electric bicycle that does not require registration. The recommended retail price (RRP) of the bicycle is €3,500.00 including VAT. The leasing company charges a monthly leasing rate of €106.00. The employer pays this in full in addition to the employee's already agreed salary. 

▶︎ Result

There is no benefit in kind for the employee as the employer bears the full cost of the monthly leasing rate. The cost of the leasing rate thus has no effect on the employee's salary.

 

Modification of Example 1

The monthly leasing rate of €106.00 is paid by the employee. Once a deferred compensation agreement has come into effect, the leasing rate will be taken into account in the monthly payroll accounting.

▶︎ Result

The employee is receiving a benefit in kind as they are forgoing a portion of their gross salary in favor of the bicycle. The portion of their income that is subject to tax and social security is calculated as follows:

 

Gross monthly salary	€4,000.00
Less salary waiver for bicycle	- €106.00
Plus tax of 0.25 % of the recommended retail price rounded down to the nearest €100.00 (€3,500.00)	+ €8.75
Income subject to tax and social security contributions	€3,902.75

 

The full gross salary of €4,000.00 per month will continue to appear on the employee's payslip. However, all income tax and social security contributions will be calculated based on a monthly amount of €3,902.75.

 

Example 2

The employee pays the monthly leasing rate of €106.00. However, the employer contributes €50.00 per month.

▶︎ Result

The employee is receiving a benefit in kind as they are forgoing at least some portion of their gross salary in favor of the bicycle. The portion of their income that is subject to tax and social security is calculated as follows:

 

Gross monthly salary	€4,000.00
Less salary waiver for bicycle (total leasing rate of €106.00 minus employer contribution of €50.00)	- €56.00
Plus tax of 0.25 % of the recommended retail price rounded down to the nearest €100.00 (€3,500.00)	+ €8.75
Income subject to tax and social security contributions	€3,952.75

 

The full gross salary of €4,000.00 per month will continue to appear on the employee's payslip. However, all income tax and social security contributions will be calculated based on a monthly amount of €3,952.75.

As far as the employee's tax and other contributions are concerned, the only relevant factor is whether the employee forgoes any of their salary. 

 

Example 3

The employer leases an S-Pedelec that requires registration and insurance for the employee. The gross recommended retail price (RRP) is €5,000.00. The monthly leasing rate of €250.00 is paid in full by the employee.

▶︎ Result

As the bicycle is categorized as a motor vehicle, the employee must pay tax and other contributions on both the possible use of the bicycle between their home and place of work and on the flat-rate valuation for the use of the bicycle. This is calculated as follows:

 

Gross monthly salary	€4,000.00
Less salary waiver for bicycle	- €250.00
Plus tax of 0.25 % of the recommended retail price rounded down to the nearest €100.00 (€5,000.00).	+ €12.50
Plus tax on the route between their home and place of work at a flat rate of 0.03 % of the RRP per kilometer (5 km)	+ €7.50
Income subject to tax and social security contributions	€3,770.00

 

The full gross salary of €4,000.00 per month will continue to appear on the employee's payslip. However, all income tax and social security contributions will be calculated based on a monthly amount of €3,770.00.

Income tax and social security at the end of the leasing arrangement

If the employee chooses to take possession of the used bicycle at the end of the agreed contract period, this will result in benefits in kind that must be taken into account in payroll accounting:

 

Contract drafting	Income tax and social security implications
Option 1: The employer has purchased the loaned bicycle and transfers ownership to the employee at the end of the agreed term.	This results in a benefit in kind to the value of the recommended retail price of the bicycle. The employer can tax this at a flat rate of 25 %.
Option 2: The employer has been leasing the bicycle from a service provider. The employee acquires the bicycle from the service provider at the end of the agreed term.	At the end of a 36-month contract, legal regulations currently assume that the bicycle's residual value is 40 % of the recommended retail price. If the service provider transfers ownership of the bicycle at a lower price, the difference constitutes a benefit in kind. Usually, the service provider takes on the resulting tax liability.

Additional company benefits related to company bicycles

In addition to providing the bicycle, the employer can also contribute to other costs associated with the use of the bicycle, which can also affect payroll accounting:

 

Benefit	Effect on payroll accounting
Free charging of (S-)Pedelecs on company premises.	No income tax or social security contributions.
Temporary provision of a company charging device for private use.	No income tax or social security contributions.
Permanent provision of a company charging device for private use.	Subject to tax and social security contributions, the benefit in kind can be taxed at a flat rate of 25 %.