The maximum tax-exempt bicycle allowance has been increased from 0.27 euros to 0.35 euros per kilometer since Jan. 1, 2024. A hefty increase, but it by no means applies to everyone. In practice, a well-intentioned measure raises a lot of questions and reinforces the call for uniformity. We are happy to provide some clarification.
What is a bicycle allowance?
This is a net allowance per bicycle mile to and from work, granted to the employee who regularly travels by bicycle between his/her place of residence and his/her place of employment.
An earlier article on bicycle reimbursement can be found here.
Like most Belgian employees, are you entitled to a bicycle allowance based on a rule within your sector (joint committee) or within your company?
Fantastic! Those sector or company rules continue to apply in full. The sector or your company is now free to increase the exempt compensation to 0.35 euros per commuting kilometer actually traveled by bicycle. However, this is not an employee's right unless it is stipulated that the maximum exempt amount is granted. It is expected that most employers will effectively increase the bicycle allowance where possible.
Based on a rule within your industry or within your company, are you not entitled to a bicycle allowance?
Then you are still entitled to a bicycle allowance of 0.27 euros per kilometer under CBA 164a, which came into effect May 1, 2023. So that amount will not be increased, although a more limited indexation is expected.
In both cases, since Jan. 1, 2024, only employees who opt for the flat-rate cost deduction in their tax return for the 2023 taxable year are still eligible. By the way, the same applies to the company (leased) bicycle for commuting.
Maximum of €3500 per year
Moreover, since the last adjustment at the end of January 2024, a ceiling of €3,500 per year applies in all cases, in addition to any other caps. Above that threshold, the bicycle allowance will indeed be taxed. According to Minister Van Peteghem, 99.6% of workers do not reach that threshold which corresponds to 7,142 kilometers per year, a trip from Brussels to New Delhi so to speak. And yet at Joule, we do have two such bicycle fanatics in our ranks!
Voluntary bicycle allowance
Finally, the employer is also interested in voluntarily increasing the bicycle allowance. Indeed, a temporary tax compensation in the form of a tax credit is provided to mitigate the financial impact of the introduction of the general bicycle allowance. This is a temporary measure for bicycle allowances paid for commuting trips made between Jan. 1, 2024 and Dec. 31, 2026, and granted no later than Dec. 31, 2027. The amount is equal to the increase in the bicycle mileage allowance multiplied by the number of kilometers for which the allowance was granted within the above period, with a maximum of 20 kilometers per single trip. The tax credit must be claimed in the tax return.
Thus, the choice of bicycle leasing becomes more attractive within sectors that are not eligible for gross pay exchanges.
Want to learn more about the financial benefits of bicycle leasing? Our experts will be happy to help.
The benefits of bicycle reimbursement
Offering employees a bicycle allowance has several benefits for the employer:
- Good for the environment by encouraging the use of sustainable transportation.
- Healthy workers: workers who bike to work regularly are healthier and less likely to get sick.
- Less congestion, less stress: it reduces the amount of traffic on the road, leading to less congestion and ultimately a better quality of life.
In addition to these benefits, a bicycle allowance is also financially attractive. The amount of the bicycle allowance is 100% deductible as a professional expense and is free of social security contributions. Other costs such as investments in infrastructure or bicycle accessories are also 100% deductible.
Combining bicycle reimbursement and bicycle leasing
Bicycle allowances are often awarded at companies where bicycle leasing is also offered. And rightfully so! A bicycle allowance is the perfect way for the employee to recoup the cost of bicycle leasing. Thus, an employee who travels enough miles can lease a bicycle almost for free.
Even without a bicycle allowance, bicycle leasing is a tax-efficient way of flexible pay, both for the employer and employee.
The employee pays no benefit in kind (VAA) and no Social Security contributions on a company bicycle. Bicycle leasing is therefore up to 70% cheaper than a private purchase of a bicycle.
Allocating a leased bicycle via gross salary exchange is often cost-neutral for an employer and is much more advantageous than a gross salary increase. The lease price of a company bicycle is a 100% deductible expense with no employer contribution.
