Employer's energy budget: no pasarán

Last year, a major energy supplier launched a fiscal ingenuity that allowed employers to offer their employees heating or electricity for free. It was taxable in the hands of the employee, but the taxable base was much less than the actual value of the benefit. But the Minister of Finance recently put a stop to that.

The trick of the flat-rate valuation of the benefits

If an employer offers a benefit to an employee, that employee is taxed on the actual value of that benefit. For some benefits, however, the value of the benefit is valued at a flat rate. Just think of the company car, a cheap loan, ...
There is also such fixed calculation for heating and electricity, from which neither the employee/employer nor the tax authorities can deviate.

Until 2021, the provision of free electricity was valued at EUR 470 per year, and the provision of free heating at EUR 930. For executive staff and company managers, these amounts were EUR 1.030 (electricity) and EUR 2.080 (heating).

A large energy supplier obtained a ruling in 2021 to also apply this flat-rate valuation to a new product it launched. The employer could then conclude a contract with the energy supplier for the supply of energy and heating to its employees. The employer paid the (fully deductible) invoice and the employee was taxed on a benefit that was estimated to be particularly low.

In the meantime, however, the minister made it clear that he could not agree to such a construction and announced measures. This time had come in mid-December.

Royal decree limits the advantage

A Royal Decree of 19 December 2021 limits the flat-rate valuation of the benefit to the situation in which the person granting the benefit also makes available the real estate for which the benefit is granted. In this way, the favorable calculation method is limited to the situations for which the flat-rate was originally intended, namely for the employee who has to live in a place determined by the employer.

If your employer pays the electricity bill for your own private home, you will be taxed again on the full value of the invoice, as if it was salary.

Past and future

The 'product' that the energy supplier offered may have been new, but the technology for having the company pay the electricity and heating bill is not. It also happened that the company manager 'repaid' exactly the amount of the benefit to the employer/company, so that there was no longer any 'benefit'. But that will also stop now if the house is not made available by the company that also pays the electricity or heating bill, then a flat-rate calculation of electricity or heating is no longer possible with effect from 1 January 2022.

The flat-rate calculation of benefits and income dates from the time when the tax authorities did not have sufficient resources to estimate the real value of each possible benefit or income or to discuss it with the taxpayer. With the latest developments in the field of data processing, this is no longer an issue: the tax authorities can find out the value of each benefit quite easily.

It seems that the major reform of the personal income tax that has been announced will target the flat-rate valuation of the benefits in general. In the RD's considerations about the energy budget, we already see clear references to the tax reform, but also the recent decision to abolish the flat-rate calculation of the income of many small self-employed persons – hairdressers, bakers, café owners, etc. from 2028, both in terms of VAT and income tax, may be a harbinger of this.

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