As usual, the start of the new year is accompanied by a number of important tax changes. One of these changes concerns the flat-rate valuation of the benefit in kind (BIK) for the free provision of electricity and heating by the company. Many companies cover the cost of electricity and/or heating for their employees and/or managers, and the employee and/or manager is taxed on a fixed amount in personal income tax. However, as of January 1, 2022, the use of a lump sum is subject to an additional condition: the company must also make the home available to the employee/employer. If this condition is not met, one will be taxed based on the actual value of the benefit. This raises the question: is it still worthwhile for the company to bear these costs?
How is this benefit taxed?
When the company bears the private cost of electricity and heating of its employee and/or manager, it is in fact providing a benefit in kind, which like wages, is taxable. However, it is not the actual amount paid by the company, but a legally determined lump sum that forms the taxable basis for personal income tax.
As of January 1, 2022, the scope of the lump sums related to the SGA for electricity and heating is reduced. Consequently, they will only apply if the company also makes the real estate, to which this benefit relates, available to its employee/manager free of charge. Having the company pay the electricity and heating bill is therefore still possible in 2022, but if the new condition is not met, the benefit provided will be taxed at its actual value.
Beneficial or not on behalf of employee/business owner?
The simulation below shows the tax impact of the additional condition using a simple example:
A business manager has an annual electricity and heating cost of his private residence of 5,000 EUR. Before 01/01/2022, the manager was taxed on the basis of a lump sum. If the condition is not met, from now on the manager will be taxed on the actual cost paid, which has a negative effect on the personal income tax to be paid.
In addition, the manager may also choose to bear this cost privately from now on. In that case, the company will pay additional wages.
From the simulation above, it can be seen that when the lump sum is not applicable, both situations are fiscally equal. This is because the net salary left to the manager remains the same.
What about the company?
In terms of personal tax, the company manager therefore does not enjoy any advantage when the cost is paid by the company compared to bearing this cost privately.
But on behalf of the company, the following benefits continue to apply when the cost is borne by the company:
- The cost constitutes a deductible professional expense on the part of the company, which will provide a tax deduction.
- The VAT is 100% deductible for the company, but VAT must be paid with regard to the VAA
- The benefit granted will also result in higher tax deductible IPT premiums (80% limit).
- In addition, no private funds need be used to pay for this expense.
Because the scope of the lump sums has been broadened, having the company pay the private costs for electricity and heating on behalf of the employee/manager is fiscally neutral compared to paying extra wages to cover this cost privately. However, in view of the advantages that this brings for the company, this remains an avenue to be explored, even in 2022.