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This article was written by
Certified Tax Advisor, Manager, National Office Tax & Legal
Certified Tax Advisor, Director, National Office Tax & Legal/Quality Assurance
The provision of employer-owned or employer-leased bicycles or e-bikes that are classified under traffic law as bicycles (no registration plate, insurance or driving-license requirement) to employees for private use requires distinguishing a variety of cases for income tax and VAT treatment. The coordinated state decree of January 9, 2020 (BStBl. I 2020, 174) has long provided an income tax classification. The German Federal Finance Ministry circular (Bundesministerium der Finanzen, BMF-Schreiben) of February 7, 2022 (BStBl. I 2022, 197) and March 3, 2026 (BStBl. I 2026, 367) clarify open questions on VAT.
Below we present the main rules in the overall context.
If the bicycle/e-bike is provided as a part of contractual remuneration or via salary sacrifice, the monetary benefit is to be taxed as follows:
1% of the quartered (2020 to 2030; 2019: halved) and then rounded down to whole EUR 100 of the manufacturer’s non-binding recommended retail price at the time the bicycle/e-bike is put into service, including VAT; if applicable, less any employee co-payments. This covers all (private) trips (Section 8 (2) sentence 10 of the German Income Tax Act (Einkommensteuergesetz; EStG) in conjunction with the coordinated state decree of January 9, 2020).
If the provision of use is made in addition to the salary already owed (Section 8 (4) EStG), the tax exemption pursuant to Section 3 number 37 EStG applies.
Furthermore, for reasons of fairness, employer-provided benefits for electrically recharging e-bikes at the employer’s premises are also not considered taxable wages (BMF-Schreiben of September 29, 2020, para. 10).
The income tax benefits for the provision of a bicycle/e-bike do not apply for VAT purposes.
If the employer-provided bicycle/e-bike may also be used privately, this constitutes a consideration-based barter-like supply (work performance in exchange for provision of the bicycle) taxable to the extent the work performance is not compensated by cash wages (BMF-Schreiben of February 7, 2022). Any employee co-payments do not reduce the VAT taxable amount.
For simplification, the monthly average value may be determined using the above 1% method; the quartering or halving of the non-binding recommended retail price does not apply for this purpose (BMF-Schreiben of February 7, 2022 with reference to para. 1 of the coordinated state decree of January 9, 2020). This value is the gross amount from which VAT must be extracted. If the value to be applied for the bicycle/e-bike is less than EUR 500 (understood to mean the manufacturer’s non-binding recommended retail price), no VAT taxation of the service to the employees is required (BMF-Schreiben of February 7, 2022). Thus, only inexpensive bicycles/e-bikes are to be favoured. The grammatically possible interpretation of using the VAT-applicable annual value so that higher-value bicycles/e-bikes would also be favoured is unlikely to have been intended by the Ministry.
Proof of private use of bicycle/e-bike by employees cannot be provided by a logbook in the absence of a meter recording total usage.
The BMF-Schreiben of March 3, 2026 takes up the Court of Justice of the European Union (CJEU) decision of January 20, 2021, case no. C-288/19, and the subsequent German federal Fiscal Court (Bundesfinanzhof; BFH) decision of June 30, 2022 case no. V R 25/21, and ultimately sees its prior legal view on vehicle provision confirmed. According to the BFH decision, the direct connection required for a taxable (barter-like) supply between the provision of a vehicle to an employee for private purposes and the (partial) work performance exists at least where the vehicle provision is individually agreed in the employment contract and used.
A different result does not follow from the CJEU decision of January 20, 2021, which mainly concerns application of place-of-supply rules. It cannot be inferred from the CJEU decision (which can likely be transferred to corresponding provision of bicycles and/or e-bikes) that a consideration-based (barter-like) supply is excluded when only the work performance is in question as the renumeration for the vehicle provision.
Deviating rules apply, for example, if the provision of bicycles/e-bikes to third parties is part of the employer’s service offering, or if e-bikes that are classified under traffic law as motor vehicles are provided for private use.
If an employer-leased bicycle/e-bike provided to the employees is attributable to the employee due to a special legal relationship independent of the employment contract – e.g., because under a subleasing arrangement the employee bears the substantial costs and risks – the associated monetary benefit generally consists of obtaining or passing on discounted leasing conditions. For income tax purposes, this is then not to be assessed under the above 1% method but at the usual retail price at the place of supply reduced by customary discounts (Section 8 (2) sentence 1 EStG). For VAT purposes, this is likely to be a consideration-based other service; however, the BMF-Schreiben of February 7, 2022 does not address such constellations, so general applicable rules must still be applied.
Notice:
At first glance, the Ministry appears to have sought broad harmonization between income tax and VAT; the fact that tax incentives introduced for climate policy reasons were not transferred into VAT law, however, was to be expected due to EU law requirements.
A VAT fairness provision for employer-provided electric charging of e-bikes would have been desirable. The provision of charging electricity thus generally remains subject to VAT.