The bicycle allowance: what is it?
The bicycle allowance is a mileage allowance paid by the employer to employees who make (part of) their commute by bicycle. As of May 2023, every employer is obliged to pay out a bicycle allowance to employees who regularly cycle to work. The bicycle allowance is an interesting solution for employees who have their own bicycle, a lease bicycle or a company bicycle.
Which amount as bicycle allowance?
The bicycle allowance is currently set at 0.27 euros (since January 2023) and is legally exempt from taxes and social contributions. The amount may change annually and depends on general indices. As an employer, you can always decide to use a higher amount, but then the remaining amount is taxable as professional income.
Example: If the employer pays a bicycle allowance of 0.20 euros per kilometre, this allowance is fully tax-exempt. When the employer provides 0.30 euros per kilometre, the first 0.27 euros are exempt from tax. The other 0.03 euros are taxable (equals salary).
This way, the government wants to encourage the use of the bicycle for commuting and can index the amount of the bicycle allowance annually. The employer is free to apply the indexation or not.
Benefits of the bicycle allowance
- The bicycle allowance is primarily intended for cyclists to cover costs. In addition, a bicycle allowance stimulates employees to jump on their bikes more often for commuting. And the more cycling employees, the more joy… and benefits.
- With the bicycle allowance, you will in time earn back the cost of your bicycle completely, if you cover enough kilometres. Let’s say you cycle 20 kilometres back and forth to work every working day, with the maximum allowance of 0.27 euros per kilometre, this will bring you 1.134 euros per year (210 working days) or 94.50 euros per month.
- For the bicycle allowance, the employer may deduct an amount of up to 0.27 euros per kilometre as a 100% deductible business expense. This reduces the company profit and therefore also the corporate tax, which is a considerable advantage for the company. Moreover, the bicycle allowance is free of social security contributions.
- A bicycle allowance can be combined with other forms of mobility such as train, bus or (company) car. For example, you can cycle from home to the train station, to continue your journey to work by train. If the employer allows it, a combination of the bicycle allowance and public transport reimbursement is possible.
- A bicycle allowance offers many advantages. Companies that already work with a bicycle allowance often combine this with bicycle leasing. This way, employees enjoy all the ‘bicycle benefits’ provided by the government.
Terms and conditions of the bicycle allowance
- Since 1 May 2023, every employer is obliged to give employees who regularly cycle to work a bicycle allowance for every kilometre cycled in commuting, and this for a maximum outward and return distance of 40 km per day. If you live further than 20 km, for example, your employer is not obliged to pay a bicycle allowance for those extra kilometres. But it is allowed. This is then the employer’s free choice. And importantly, this possible extra bicycle allowance remains tax-exempt.
- The bicycle allowance only applies to the kilometres travelled to and from work. But which route does the employee take? The company looks for the best road together with the employee. Because the shortest way is not always the safest!
- In some cases, the employer may even reimburse several rides back and forth per day. For example, when the employee has lunch at home and thus travels between work and home several times a day.
- As an employer, you can also use the bicycle allowance for business trips, even if these are done with a company bicycle. In this case, the bicycle allowance is 100% deductible, but does incur social charges.
Registering the kilometres on your account
Keeping track of the exact number of kilometres cycled by all employees: how do you do it? There is no legal regulation for this. To keep everything well-organised, many companies opt for a digital registration linked to electronic access control or a bicycle calendar. The employer often makes the employee sign a statement in honour once, indicating the cycling frequency and commuting mileage.
Bicycle allowance + bicycle leasing = an ideal combo
And can you combine a lease bicycle with the bicycle allowance? Then you have the perfect deal for that relaxing ride to and from work. Because you also get a lot of tax benefits on a lease bicycle. Unlike a company car, the benefit in kind is completely exempt from social security and taxes. As a result, employees enjoy a nice financial benefit without the employer having to increase its wage costs. Would you like to have more information? We have listed all the ‘tax benefits of bicycle leasing‘.
More information on bicycle leasing?
Would you like to know exactly how bicycle leasing works? Then download our white paper ‘What is bicycle leasing?’ and find out how to get bicycle leasing kick-started smoothly.