Company bikes have become a popular employee benefit, offering workers the opportunity to acquire a high-quality bicycle tax-free without a large upfront investment. This article addresses the most common questions and answers related to company bikes. Our experts respond to, among other things, what a company bike is, how its taxation works, and who the benefit suits. Additionally, we cover leisure use, theft situations, and other important topics. Dive with us deeper into the world of company bikes and discover everything essential about this modern employee benefit!
What is a company bike?
A company bike is a bike owned by the employer or acquired through a leasing agreement, which the employer provides for the employee's use. Usually, the company bike benefit is arranged so that the employee can independently acquire the desired bike under pre-agreed terms. The use of the bike is not tied to commuting, and the employee can use the bike as they wish, even entirely during their free time.
In addition to regular bicycles, electric-assisted bicycles also qualify as company bikes. The benefit usually directly covers insurance for the bike, and it is often possible to include maintenance and accessories in the bicycle benefit as well.
The most common practice for offering the company bike benefit is to provide it to employees in permanent employment. The bicycle benefit can be offered either included in the employee's current salary, in which case the employee's gross salary decreases by the taxable value of the bicycle benefit, or alternatively as a salary increase either partially or fully.
This modern employee benefit supports sustainable development and is an effective way to encourage staff to take care of their well-being and endurance – also at the workplace.
How does the taxation of a company bike work?
The bicycle benefit is a completely tax-free fringe benefit, in other words, tax-free income for the employee. This basically means that the employee does not have to pay tax on the part of their salary used to acquire the company bike. The tax-free portion of the company bike benefit has covered 1200 euros per year since 2021. Since there are 12 months in a year, the monthly taxable value of a company bike acquired through a leasing agreement is typically 100 euros, which maximizes the tax benefit the employee gains from acquiring the bike. If the costs of the company bike exceed 1200 euros per year, the excess part is considered taxable income.
If the company bike is acquired through a leasing agreement, the taxable value of the bicycle benefit is directly formed from the monthly leasing fee of the bike package. Any administrative fees charged to the employer are not included in the taxable value of the bicycle benefit.
If the company bike is purchased by the company, the annual taxable value of the bicycle benefit is the total VAT-inclusive purchase price of the bike and accessories divided by five years plus the capital interest, which is calculated in the first year from the purchase price and in subsequent years the capital is reduced by the amount of depreciation taxed the previous year.
The employer must report the taxable value of the bicycle benefit to the Tax Administration in the same way as other fringe benefits. It is good to remember that when calculating the value of a company bike, all related costs are taken into account, such as leasing fees and any maintenance costs included in the bicycle benefit according to the tax authority's guidelines. You can read more here about reporting the bicycle benefit to the tax authorities.
In tax matters, it is always advisable to consult an expert to ensure that all necessary information and obligations are properly handled.
Who is the company bike benefit suitable for?
The company bike is an excellent choice for all kinds of cyclists, whether an experienced pro or someone just planning to start cycling. City cyclists can smoothly avoid traffic jams and improve their well-being on their commutes. An electric bike adds comfort for longer distances and enables effortless movement even in challenging terrain – and as a company benefit, its acquisition is significantly more affordable. For those interested in exercise, the company bike offers an easy and natural way to increase activity in daily life without the need for separate gym memberships. For environmentally conscious employees, it is an ecological way to reduce their carbon footprint. For families, the company bike is also a practical solution: with accessories such as child seats or trailers, the bike perfectly meets the whole family's needs, and especially with an electric bike, their use is effortless.
Can a company bike be used during free time?
Yes, the company bike can also be used during free time. This largely explains the huge popularity of company bikes. Using the company bike does not require commuting to work; it can be fully utilized for all everyday mobility, such as shopping trips, hobbies, or weekend excursions.
Allowing free-time use increases the bike's versatility and usage rate. Additionally, it promotes healthy lifestyles and environmental friendliness more broadly than just a bike used for commuting. However, it is good to remember that although using the bike during free time is allowed, any damages or theft must be properly reported and necessary insurance taken care of.
Who owns the company bike?
Ownership of the company bike depends on how the bike was acquired. Generally, there are two main ways: leasing agreement and direct purchase for the company.
Leasing agreement: Most often, a company bike is acquired through a leasing agreement, where the leasing company owns the bike for the entire contract period. At the end of the contract period, the employee usually has the option to purchase the bike at a favorable price. The bike can also be returned to the leasing company at the end of the contract period.
Direct purchase: If the employer buys the bike directly in the company's name, the bike becomes company property. In this case, the employee can use the bike during the employment period under agreed terms, but ownership remains with the employer. When the employee leaves the company or the employment ends, the bike is returned to the employer.
Does home insurance cover the employer-provided bicycle?
An employer-provided bicycle cannot be covered by home insurance. It should be remembered that the employer-provided bicycle is owned by the employee only after the employee redeems it for themselves. However, employer-provided bicycles often come with a comprehensive insurance package covering theft and damage.
What if the employer-provided bicycle is stolen?
The theft of an employer-provided bicycle is an unfortunate situation, but it is good to be prepared in advance. Most employer-provided bicycles are insured, and the insurance usually also covers theft cases. The first step when the bike goes missing is to report the theft to the authorities, the employer, and any leasing company.
The insurance company often requires a copy of the police report and detailed information about the damage to initiate the compensation process. It is important to note that insurance terms can vary between companies. In some cases, deductibles or other conditions may affect the amount of compensation and the duration of the process. Employers should clarify these terms in advance and clearly inform employees about them.
To prevent thefts, it is recommended to use high-quality locks and store the bike in a secure place whenever possible. Although theft cases are rare, good foresight and appropriate measures can significantly influence the risk.
Does the employer-provided bicycle need to be reported to the tax authorities?
Yes, the employer-provided bicycle must be reported to the tax authorities. In Finland, the employer-provided bicycle benefit is tax-free up to 1,200 euros per year, but this does not mean the benefit does not need to be reported.
It is the employer's responsibility to report all fringe benefits offered to employees, including employer-provided bicycles, to the Tax Administration. The report is made to the income register in the same way as other salary information and fringe benefits. If the bike's value exceeds the annual limit of 1,200 euros, the excess amount is considered taxable income and must also be reported.
The reporting obligation applies to all situations regardless of whether the bike is purchased directly into the company's ownership or through a leasing agreement.
Is an employer-provided bicycle cheaper?
An employer-provided bicycle is significantly cheaper for the employee than a normally purchased bike. Thanks to the tax-free bicycle benefit, the employee does not have to pay tax on the portion of their salary used to acquire the bike. This saves the employee up to 30% on the purchase price compared to, for example, a bike bought with cash. The bicycle benefit can often also include maintenance and accessories, allowing these to be acquired tax-free alongside the bike. Additionally, cycling is an affordable alternative to driving, and many have replaced the family's second car with a quality electric bike.
In summary, it can be stated that when properly utilized, the employer-provided bicycle benefit offers significant savings and makes acquiring a quality bicycle easier and more affordable for both the employer and the employee.
