The Netherlands have a reputation as a bicycle country. So it should surprise no-one that company bicycles are a popular means of transport. A company bicycle can save you money: there are tax benefits for entrepreneurs with and without employees. Read here which schemes there are and which ones you can use.
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What schemes are there for your company bicycle?
There are 4 different tax schemes for a bicycle, electric bicycle, or pedelec for your company:
- Company bicycle or lease bicycle
- Using part of the gross salary
- Allowance per kilometre
- Interest-free loan
The schemes you can use depend on your situation:
- You are a sole proprietor (eenmanszaak) and want to buy a company bicycle for yourself: you can make use of the Company Bicycle scheme, but not of the other schemes, because you are not an employee.
- You want to arrange a bicycle for your employee(s): you can make use of all 4 schemes.
- You are the director-major shareholder (dga) of your bv or nv (public or private limited company): this also makes you an employee, which means you can make use of all 4 schemes.
Company bicycle for self-employed professionals
You buy or lease a bicycle with your sole proprietorship (eenmanszaak). That is permitted if you will use the bicycle professionally for at least 10% of the mileage.
For income tax purposes, the additional tax liability is 7% of the suggested retail price of the bicycle. You can check the suggested retail price (in Dutch) on https://www.bijtellingfietsvandezaak.nl. As a self-employed professional, you add this 7% additional tax liability to your profit.
Deductable expenses for self-employed professionals
You can deduct the purchase price of the company bicycle from the profit with an annual amortisation (depreciation). See how you calculate the amount of depreciation.
In addition, you may deduct other expenses for the company bicycle. For example, the costs of bicycle insurance, repairs, or accessories.
You can deduct the VAT on the purchase cost and other bicycle expenses as input tax. If you also use the company bicycle for private purposes, you must determine how you deal with the VAT. You have 3 options:
- You deduct no VAT at all
- You only deduct the VAT for the percentage of company use
- You deduct the full amount of VAT, but you pay VAT over the percentage of private use at the end of the year.
Read more about VAT deduction in case of mixed use (in Dutch).
No allowance per kilometre
You do not report any travel expenses for the business kilometres you make with the company bicycle.
Company bicycle for your employees
You buy or lease a bicycle for your employees.
For the purpose of payroll taxes, the value of the bicycle is 7% of the suggested retail price. You can check the suggested retail price (in Dutch) on https://www.bijtellingfietsvandezaak.nl.
You add the additional tax liability to the gross annual salary of your employee. Over the amount of this addition, you withhold wage tax / national insurance contributions per tax period.
In addition, you pay the Tax and Customs Administration employee insurance premiums and healthcare insurance contributions over the additional tax liability.
It does not matter how the bicycle is used
Your employee can use the bicycle for private purposes without limitation. They do not need to use the bicycle for commuting.
Calculation example: Company bicycle for your employee
Your employee has a gross annual salary of €35,000.
The suggested retail price of the bicycle is €2,000.
The additional tax liability per year is 7% of €2,000 = €140.
The employee pays wage tax / national insurance contributions over the additional tax liability. For 2020, this is €58 for the annual salary in the example. Your employee then pays € 4.83 per month for a bicycle worth €2,000.
You pay employee insurance premiums and healthcare insurance contributions over the additional tax liability.
Does your employee pay a contribution?
In that case, you can deduct the monthly contribution from the amount of the additional tax liability. Please note: you may not deduct more than this amount.
Keep the additional tax liability untaxed for your employee
The amount of the additional tax liability remains untaxed if you indicate that the amount is a final-levy wage. In that case, the bicycle will cost your employee nothing. You can only do this if the cost remains below the ‘discretionary scope’ (the available limit, see the regulation: Work-related costs scheme). Otherwise, you will pay an 80% final levy on the amount of the additional tax liability. You must state the final-levy wage in each tax return period.
Kilometre allowance no longer untaxed
If you have bought or leased the bicycle for your employee under the Company Bicycle scheme, the kilometre allowance (or mileage allowance) for commuting by bicycle is no longer tax-free. You can still give your employee a tax-free allowance for commuting by public transport or by car.
Deductible expenses for employers
Because you pay for the bicycle for your employee, you can deduct the costs from the profit. You do this with an annual depreciation. Find out how to calculate the amount of depreciation (in Dutch). VAT is deductible for a maximum of € 130 if you meet the conditions. This means that you may deduct the full VAT for a bicycle of €749 (incl. VAT) or less, if:
- you buy or lease a bicycle for your employee for the first time;
- your employee does not receive any other allowances for commuting;
- your employee does not pay a personal contribution for the bicycle.
In other cases restrictions apply. Read more about the conditions and view examples of permitted deductions for employee benefits (in Dutch).
Using part of the gross salary
With the gross / net allowance, your employee pays portion of their gross income. For that portion, they receive an allowance to buy a bicycle. You indicate this allowance as the final-levy wage. You do not pay tax over this, as long as you stay within the discretionary scope of the work-related costs scheme. Because the amount is deducted from the gross salary, you and your employee pay less wage tax and premiums.
Gross / nett allowance
One of your employees wants to buy a bicycle. He has a gross monthly salary of €4,500. The bicycle costs €1,250. You convert €1,250 of your employee's gross salary into an allowance for the purchase of the bicycle. You do this by deducting that amount from his gross salary. You can do this in one go or spread out over several months within the same calendar year.
Normal month for your employee:
- Gross salary €4,500
- Taxed at 40% (€1,800 in tax)
Month of bicycle purchase:
Your employee will receive a net payment of €1,250 in their account. This allowance is deducted from the gross salary.
- Gross salary (€4,500 - €1,250) = €3,250
- Taxed at 40% (€1,300 in tax)
- Remains: a net salary of €1,950
- Total in employee's account €1,950 + €1,250 = €3,200
The benefit for your employee
Your employee will receive €500 more than the 2,700 they normally receive. The tax savings of 40% on €1,250 amount to €500.
Your advantage as an employer
You designate this compensation of €1,250 as the final-levy wage. You do not pay tax over this amount as long as you stay within the discretionary scope. Also, you pay less employee insurance premiums and employers' levy: over €3,250 instead of over €4,500.
Tax-free kilometre allowance
Your employee can also finance the bicycle with a tax-free kilometre allowance. In that case, you reimburse your employee per commuted kilometre commuting. Reimbursements of up to €0.19 per kilometre are untaxed.
You lend your employee an amount to buy a bicycle. Because your employee repays this amount, it is not deducted from the discretionary scope. The employee can also repay the loan with the untaxed kilometre allowance.
You lend your employee €1,500 for a bicycle. They will receive a €0.15 kilometre allowance for a home-work journey of 4 kilometres. That is a compensation of €1.20 per working day. They then repay the loan in about 5 years.