12/7/2010, Cycling Embassy of Denmark
Denmark is in many aspects a front-runner when it comes to cycling. Unfortunately, the area of tax incentives for bike commuting is not one of them.
While there are no such tax incentives in Denmark, countries like the United States, the United Kingdom, Italy, Belgium and Holland have all introduced different variations of tax incentives for bike commuters. Especially the English Cycle to Work schemes and the Dutch regulations are inspirations to other countries. Even though the American regulations are not as favourable as the English and Dutch, the regulations serve as a way to give companies and employees incentives to a more eco-friendly transport behaviour. In the following you can read a short description of different countries’ bike tax incentives.
Cycle to Work schemes in the UK
The 1999 Finance Act introduced in the UK an annual tax exemption to promote healthier journeys to work and reduce environmental pollution. As part of the government’s Green Transport Plan, this allows employers – both private and public – to lend cycles and cyclists’ safety equipment to employees as a tax-free benefit.
A condition is that the schemes must apply for all employees, and that bikes and equipment are used mainly for work-related purposes – meaning that more than 50% of the use of the cycle and safety equipment must involve a journey to or from the workplace. If the employee does not meet the condition of work-related use, the employee is taxed of the cost-free use.
It is the company, who owns the bikes and the equipment, and the company who can write off and deduct the expenses. At the end of the loan period, e.g. due to job change, the company can offer the bike and the equipment to the employee at market value.
Employers can pay up to 20 pence per mile tax free to employees who use their own cycles for work-related travels.
You can read more about the English Cycle to Work scheme here: Cycle to Work Scheme – Implementation Guidance and Particular benefits: bicycles: simplified approach to valuing cycles to employees after end of loan period
Bike incentives in Holland and Belgium
In 2001, a tax reform was implemented in Holland with, amongst others, the purpose of encouraging eco-friendly means of transport. This action meant that an employer is now able to make company bikes, rainwear and other cycle equipment available to employees without demanding any tax liability from them. Furthermore, an annual tax credit was introduced for the employees when using their own bike to work. In this way the employer can pay the employee 0.15 € per kilometre tax free.
In Belgium, companies and public organisations are likewise allowed to pay their employees when cycling to work with an amount of 0.20 € per kilometre per day (no more than 15 kilometres a day). The supplement is tax free for the employees and the employers get tax credit for the expense.
Research from Belgium has shown that in companies where the fare is being paid, cycling increases considerably (in the study in case, cycling increased from 6,3% to 9,5%). Furthermore, companies in Belgium are allowed to give their employees a tax-free bike. In contrast to Holland, there is no limit to the value of the company bike and the employer is allowed to compensate the cycling employee for the maintenance costs of the bike and even the bike parking.
Bicycle Commuter Tax Provision (USA)
The American Government passed in October 2008 a $700 billion rescue package including the Bicycle Commuter Tax Act. With this act, bike commuters may receive up to $20 per month ($240 a year) tax credit for every qualified month that they bike to work. The act was part of a package dealing with climate, energy savings and transport regulation.
To qualify for the tax credit an employee must regularly use a bike for a substantial portion of the travel to and from work and not receive any other qualified transportation benefit. The companies are obliged to use the deduction to compensate the employees expenses related to the bike.
The American scheme will probably not alter the transport habits in the US, but it is an expression of an effort, which hopefully will be extended the next years.
Source: Cycling Embassy of Denmark
UK - Particular benefits: bicycles: simplified approach to valuing cycles sold to employees after end of loan period