13.06.2019

Tax incentives for electromobility

Electromobility is considered to be one of the key elements for sustainable and climate-friendly transport based on renewable energies. On 8.5.2019, the Federal Ministry of Finance (Bundesministerium der Finanzen, BMF) published a draft bill for the proposed “Act to promote further tax incentives for electromobility and to amend other tax regulations”. A short overview of the main contents of the draft bill is set out below. In this connection, there is also a discussion of the provision of (electric) bikes by employers that has been newly regulated with the identical decrees of the highest tax authorities of the federal states (Länder), from 13.3.2019.


Contents of the draft bill from 8.5.2019

Against the background of a significant reduction in the CO2 emissions and pollution caused by road traffic, the draft bill contains the following measures, in particular, with respect to fiscal incentives for promoting environment-friendly mobility:

  • the tax exemption for the benefi ts granted by employers for the electric charging of electric or hybrid vehicles at the workplace of the employer or affiliated companies and for providing company charging devices for temporary private use would be extended until the end of 2030;
  • a new flat-rate tax on season tickets at 25% paid by employers and without employees having to reduce their distance-related tax allowance;
  • special depreciation on new all-electric delivery vehicles acquired after 31.12.2019 in the amount of 50% of the cost of acquisition in the year of purchase (Section 7c of the German Income Tax Act – Draft (Einkommensteuergesetz-Entwurf, EStG-E));
  • the halving of the assessment base for company car taxation for the private use of company electric vehicles or externally rechargeable hybrid electric vehicles has been extended to cover purchases made up to and including 31.12.2030;
  • the introduction of a halving of trade tax add-backs of hiring or leasing expenses for electric vehicles or externally rechargeable hybrid electric vehicles as well as for bikes that are not deemed to be motor vehicles (Section 8 no. 1d clause 2 of the Trade Tax Act – Draft (Gewerbesteuergesetz-Entwurf, GewStG-E)). The provision should only be applied to amounts that are based on contracts concluded after 31.12.2019 and would be valid for the last time for the 2030 reporting period (Section 36(3) GewStG-E);
  • the tax exemption for the non-cash benefit of a(n electric) bike being provided by an employer, in addition to the remuneration that will in any case be due (Section 3 no. 37 EStG), would be extended until the end of 2030 as well as the
  • corresponding extension of the parallel exemption provision in Section 6(1) no. 4 clause 6 EStG for the private use of a company (electric) bike.

Furthermore, other concessionary or relief measures are planned that will provide, among other things, procedural simplifications for employers, support measures to ease the pressures on the housing market as well as tax relief for employees:

  • the introduction of a new flat-rate allowance for commercial drivers,
  • increase in the lump-sum allowances for subsistence expenses,
  • income tax exemption for benefits in kind in the context of alternative housing options (e.g. “Wohnen für Hilfe“ or “Homeshare”),
  • the introduction of a valuation adjustment for staff housing and
  • the introduction of a reduced VAT rate for e-books.

Furthermore, measures to combat tax structuring and safeguard the tax revenue as well as mandatory adaptations to EU law and ECJ case law have also been included. The latter essentially comprise the so-called quick fixes (measures urgently requiring national transposition that are related to the VAT system in the EU):

  • direct deliveries to consignment warehouses,
  • chain transactions and
  • intra-Community supplies.

Finally, the clarification of outstanding issues as well as consequential amendments, the correction of errors and other editorial amendments constitute other elements of the draft bill.


Please note: The draft bill with the processing status as at 8.5.2019 has been published on the BMF website.


New BMF circular on the provision of (electric) bikes

Demand for so-called “job bikes” is growing steadily. Company bicycles have proven to be successful as innovative tools for employee recruitment and have opened up an opportunity for employers to provide an environmentally-friendly alternative to company cars. Furthermore, the German government is promoting the provision of (electric) bikes from a tax point of view (cf. section 1). On 13.3.2019, the BMF published an identical decree of the federal states on the provision of (electric) bikes. This replaces the previous identical decree of the federal states from 23.11.2012. The principles discussed below are applicable here (updates within the framework of the draft bill are pointed out in each case).


The type of provision is key

There are tax concessions available for the benefit that arises from the provision of a company bicycle that is attributable to an employer. The bicycle does not have to be owned by the employer but, in fact, it can also be one that has been hired or leased by the employer. However, the ownership may not be transferred to the employee; it would also be detrimental from a tax point of view ift he employee were the benefi cial owner (Section 39 of the German Fiscal Code). Such a case would be deemed to exist if, for example, internally, the employee had the main rights and obligations of a lessee and alone incurred the risk and liability for maintenance, material defects, destruction and damage.

 

Please note: The tax exemption applies to employees. To this end, the defi nition of an employee is the one used under German tax law and, accordingly, the exemption provision applies to mini jobbers or shareholding managing directors even if they are not classed as employees under social security law.


Cases without salary conversion

If bicycles or e-bikes are provided in addition to the remuneration that will in any case be due, i.e. ‘on top’, then this would constitute neither remuneration nor a gift for the purposes of the € 44 exemption limit and would also not be subject to social insurance. According to the BMF circular, the tax exemption is applicable for the first-time provision of bikes after 1.1.2019 until 31.12.2021 and, according to the draft bill from 8.5.2019, would even apply until the end of 2030 (Section 52(4) EStG-E). The
intention is to acknowledge the fact that the employer is providing a genuine additional benefit.
 

Please note: The tax exemption can also be transferred to the self-employed and freelancers if the bicycle is a business asset. The ‘withdrawal for private use’ approach would not apply. Nevertheless, it remains to be seen here if the non-recognition as a withdrawal will also be extended to VAT.


Cases with salary conversion

If (electric) bikes are provided via salary conversion, or if the bike in question is classed as a motor vehicle under transport guidelines, then providing such bikes gives rise to non-cash benefits that have to be valued on the basis of the so-called 1% rule. For the first-time provision of bikes in the period from 1.1.2019 until 31.12.2021, the value of the non-cash benefi t has to be determined on the basis of 1% of the manufacturer’s halved recommended retail price, rounded off to the nearest € 100 (the so-called “0.5% rule”). Here, the draft bill from 8.5.2019 also provides for an extension to this rule until the end of 2030 (Section 52(12) EStG). Moreover, in this case, no use is made of the € 44 exemption limit either. If the company bicycle was already provided to an employee for private use prior to 1.1.2019 then the application of the full 1% rule will remain unchanged.
 

Recommendation: Non-cash benefi ts from providing (electric) bikes arise not only within the scope of provision for use by the employer but, in fact, could also occur in a potential subsequent discounted transfer of ownership of the (electric) bike (also in the case of transfer of ownership by third parties, such as any leasing companies). Flat-rate taxation could be possible here. The contract models should therefore be carefully scrutinised in order to avoid having to make additional payments subsequently.

 

WP/StB [German public auditor/ tax consultant] André Jänichen

From: PKF newsletter 06/2019