Employer's energy budget: no pasarán
March 2022 – Last year, a major energy supplier suggested a fiscal engineering that allowed employers to offer free heating or free electricity to their employees. The employee was taxed on this benefit, but the tax base was much lower than the real value of the benefit. But the Minister of Finance recently objected.
The trick of lump-sum valuation of benefits
When an employer grants a benefit to an employee, the employee is taxed on the actual value of the benefit. However, the value of some benefits is assessed on a flat-rate basis. Think of the company car, the soft loan, etc.
For heating and electricity, too, there is a flat-rate calculation from which neither the employee/employer nor the tax authorities can derogate.
Until 2021, the provision of free electricity was valued at 470 euros per year, and the provision of free heating at 930 euros. For managers and executives, these amounts were 1 030 euros (electricity) and 2 080 euros (heating) respectively.
In 2021, a major energy supplier obtained a ruling to also apply this flat rate assessment to a new product it had just launched. In practice, the employer could enter into a contract with the energy supplier for the supply of energy and heating to its employees. The employer paid the (fully deductible) bill and the employee was taxed on a benefit that was estimated to be a particularly small amount.
However, the minister has since made it known that he cannot accept such a construction and has announced measures. This was done in mid-December.
Royal Decree limits the benefit
A Royal Decree of 19 December 2021 limits the flat-rate assessment of the advantage to the situation where the person granting the advantage also makes the building for which the advantage is granted available. In this way, the advantageous calculation is limited to the situations for which the lump sum was originally intended, i.e. for the case where the employee has to reside at a place determined by the employer.
If your employer pays the electricity bill for your own private home, you are again taxed on the total value of the bill, as if it were remuneration.
Past and future
The 'product' that the energy supplier was offering may have been new, but the technique of having the company pay the electricity and heating bill was not. For example, it was also possible for the company director to 'pay back' the exact amount of the benefit to the employer/company, so that there was no longer any 'benefit'. However, this is no longer possible if the house is not provided by the company, which also pays the electricity or heating bill. The flat-rate calculation of electricity or heating is no longer possible as of 1 January 2022.
The flat-rate calculation of benefits and income still dates back to the time when the tax authorities did not have sufficient means to estimate the real value of each benefit or income or to discuss it with the taxpayer. With the latest developments in data processing, this is no longer a problem: the tax authorities can determine the value of each benefit quite easily.
It seems that the announced major reform of personal income tax will aim at a flat-rate assessment of benefits in general. The recitals of the Royal Decree on the energy budget already contain clear references to the tax reform, but the recent decision to abolish the flat-rate calculation of the income of many small self-employed people - hairdressers, bakers, cafes, etc. - from 2028 onwards, both in terms of VAT and income tax, is undoubtedly also a sign of this reform.
