Embracing sustainable commuting: Update on company bicycles and bicycle allowance

A circular letter (Dutch | French) published by the Ministry of Finance on 28 March 2024 supplements the law of 22 December 2023 amending the legislation regarding the tax regime for the bicycle allowance. The new measures apply as from 1 January 2024 to public and private sector employees and directors. 

In addition, a royal decree (available in Dutch and French) published on 21 March 2024 addresses the procedures for providing proof that the conditions for the employer tax credits have been met.

Impact on employer obligations

Salary forms

As from income year 2024, employers must include the bicycle allowance and the value of a company bicycle in the salary forms for all employees (Form 281.10) and company directors (Form 281.20). The value of a company bicycle for these purposes is determined based on the actual costs incurred on an annual basis and pro-rated for the period that the bicycle was available to the employee or director, as follows:

• For a leased bicycle, the value is the aggregate lease payments made by the employer for the relevant year.

• For a purchased bicycle, the value is the cost of the bicycle and accessories depreciated over five years. If the employer also covers insurance, maintenance, and repair expenses, these costs are also taken into account when determining the benefit in kind. In such cases, it is accepted that the benefit in kind may be determined based on the lease price that the employer would have had to bear if it had entered into a lease agreement for the bicycle including similar services.
  

Wage withholding taxes

The bicycle allowance and the benefit of a company bicycle are not taken into account when determining the basis on which wage withholding taxes are calculated.

In addition, the previous requirement for a written declaration from the employee or director that they were not going to claim the actual business expenses in their personal income tax return no longer applies.

Whether the conditions of the exemption are fulfilled will be determined when the employee or director files their personal income tax return. 

Combination with actual business expenses

Employees and directors claiming actual business expenses in their personal income tax return may not benefit from the tax exemption. In such cases, the bicycle allowance and the bicycle are taxed as professional income in the hands of the employee or director as follows:

• The bicycle allowance is taxed on the basis of the actual allowance received.

• The bicycle is taxed on the basis of the actual cost to the employer (see “Salary forms,” above).
  

Indexation of lump sum allowance per kilometre and annual ceiling

As from 1 January 2024:

• The maximum tax-exempt amount of the bicycle allowance has been increased to EUR 0.35 per kilometre (km) for 2024 and will be indexed annually. Any excess allowance above EUR 0.35 per km is considered as taxable income. In addition, the annual general commuting exemption (EUR 490 for income year 2024) for the costs of home to work travel cannot be applied to the excess allowance.

• On an annual basis, the tax exemption is limited to a maximum of EUR 2,500 per year. Any excess allowance above EUR 2,500 is considered as taxable income. If not already applied in respect of another mode of transport (e.g., a company car), the annual commuting exemption of EUR 490 for 2024 may be applied to the excess amount.
  

Tax credits–burden of proof

To mitigate the possible cost increase for employers following the introduction of the general bicycle allowance (based on collective bargaining agreement (CBA) No. 164 (Dutch | French)) and to motivate employers to increase the existing bicycle allowance in line with the 2021 bicycle action plan, two temporary tax credit schemes have been introduced (see our Tax Alert of 25 January 2024 for further details and an overview of all legislative changes in the mobility landscape).

The royal decree of 21 March 2024 sets out the procedures for providing proof to substantiate claims for the tax credit for the period from 1 May 2023 to 31 December 2024 (“Tax Credit I”) and from 1 January 2024 to 31 December 2026 (“Tax Credit II”).

Tax Credit I

For income year 2024, the document of proof must specify for how many of the kilometres listed for that year the application of the tax credit for the bicycle allowance granted based on CBA No. 164 is requested. The other elements that must be included are similar to those for Tax Credit II (see below).

Tax Credit II

In summary, the document of proof must contain the following elements:

• The reference bicycle allowance (EUR 0.18 per km) and the indexed reference bicycle allowance (which may differ and is EUR 0.35 per km for income year 2024).

• The total number of kilometres travelled during calendar years 2024, 2025, and 2026 and for which of those years the bicycle allowance was higher than the indexed reference bicycle allowance. In cases involving multiple calendar years, the number of kilometres should be split per calendar year.

• The amount (in EUR per km) of the bicycle allowance for those kilometres travelled. If the amount changed during the calendar year, the different periods should be split including the start and end date of each period.

• Whether the increased bicycle allowance has been agreed based on a collective labour agreement, labour regulations, or an individual labour agreement.

Taxpayers that are subject to corporate income tax, tax for legal entities, or nonresident income tax as a legal person must attach the document as an annex to their tax return. Taxpayers that are subject to personal income tax or to nonresident tax as a natural person must prepare and retain the document to be provided to the tax authorities if requested but are not required to submit it with their tax return.