The tax-free job ticket

The Bundestag has decided on the tax-free job ticket to create a tax incentive for the use of public transport. What should be considered for tax purposes?

Passengers wait for a train at Frankfurt Central Station.

AMany employees find themselves stuck in traffic jams on their daily journey to work by car. The environment is also suffering from the sharp increase in car traffic. The legislature wants to counteract this: On November 8, 2018, the Bundestag passed the tax-free job ticket to create a tax incentive for the use of public transport.

From 2019 onwards, the tax exemption includes both employer subsidies for tickets purchased by employees and the free or discounted provision of tickets (benefits in kind) for the journey to work by public transport. Subsidies from the employer for trips by taxi or flights are not eligible. In addition, the employer can also reimburse expenses for non-professional journeys in local public transport tax-free.

Important: The employer’s services are only tax-free if they are provided in addition to the wages owed anyway; a deferred salary is therefore detrimental. The tax-free subsidies are offset against the income-related expenses that the employee can claim to reduce tax on the way to work. For example, the flat-rate commuter allowance is only taken into account as a tax-reducing amount if it exceeds the tax-free allowance. The first criticism has already been voiced about this offset against the commuter allowance. The Federal Council, which still has to approve the law, could take it up.

Incidentally, this is not offset against the flat-rate distance allowance when using a bicycle provided by the employer. The pecuniary benefit generally resulting from a transfer is tax-free in the future according to the regulation also decided by the Bundestag. This applies both to e-bikes (with speeds of up to 25 kilometers per hour) and to bicycles that are ridden by muscle power alone.

The author is a tax advisor and partner at EY.