The 20.000 kilometer regulation, mileage deduction or allowance. You can call it many things! When it has to do with SKAT, even the best of us can be confused but here we will give you a guide through the tax jungle so you are ready to deal with potential questions from your employees. 

What is mileage deduction? 

If your employees are doing business related transport in their own car, you can as an employee choose to pay them a tax free mileage deduction. The purpose with this compensation is primarily to cover the expenses that your employee should have when using their private car. It is the state that determines the charges for the mileage deduction and it is here that the 20.000 kilometer regulation becomes relevant. The highest tax free rate is paid until the employee hits 20.000 driven kilometers annually. In the section below you can get the overview of the rates for 2020-2024. 

Rates for mileage deduction in 2021 – 2025 

As an employer you are not fixed on the rates. This means that you can both choose to give your employees higher or lower rates than the above mentioned. However, please notice that this will have different consequences for your employees. If you choose to pay higher rates, the total amount will be tax obliged for the employee. The exception for this is if a percentage that outweighs the rates is still being taxed as a regular wage. If you choose to pay a lower rate, the sum will still be tax free for the employee. 

Is the mileage deduction the same as driving reduction? 

The short answer is no, it is not. Mileage deduction is a tax free payment for your employees that is given at business related transport. Driving reduction can be given if you have more than 24 kilometers to and from work and this can be given at any type of paid work. A driving reduction is not paid directly to the employee but instead calculated in the employee’s annual taxes. As an employer it is important to remember that you cannot give your employees both mileage deduction and driving reduction. It is a mere question of a choice, that you have to pick: If you don’t want to pay mileage deduction, your employees can get a driving reduction instead. 

Rules for driving directly from home to a customer

A trip from the company’s workplace to a customer is considered business-related driving. But what happens if the employee drives directly from their home to a customer? In such cases, it’s important to understand the rules for tax-free mileage reimbursement, which can be paid to employees using their private car for business purposes.

If an employee drives directly from their home address to a customer (or vice versa), the distance between the employee’s home address and the workplace address must be deducted when calculating the reimbursable kilometers.

Example 1: Suppose an employee is traveling to a customer located 120 km from their home and 70 km from the office. If the employee drives directly from home to the customer, the 50 km difference (120 km – 70 km) must be deducted from the mileage reimbursement. If the employee drives from the office to the customer, the entire distance (the shortest route) of 70 km is eligible for reimbursement.

Example 2: Suppose the employee is traveling to a customer located 2 km from their home and 20 km from the office. If the employee drives directly from home to the customer, they can claim reimbursement for the 2 km. If the employee drives from the office to the customer, the reimbursable distance is also 2 km, as the calculation would be 20 km minus 18 km (the assumed distance from home to the office), resulting in 2 km.

Let Intempus keep track of the distances

As it appears from the above information, it is a big advantage to register your driving in a systematic way, so the employee and employer have a quick overview of the driven number of kilometers. With the Intempus app your employees can quickly and easily register their business driving. All they have to do is type in the respective addresses and then the distance is automatically calculated in the Intempus app. 

Aside from this, the employee and the employer can continually see how many kilometers the employee has driven and when the employee is approaching the 20.000 driven kilometers, and thereby a new payment charge. At the same time your employees are rid of having a notebook laying in the glove compartment where the business driving is noted. Instead this can be dealt with a couple of clicks in Intempus’ app. If you are interested in hearing more about how Intempus can help you and your company, you are always welcome to contact us on +45 26390400 or to book a free demo:

Did you know that… 

• The mileage deduction has to be calculated after the actual number of kilometers that your employee is driving. If you then choose to pay your employee a fixed amount, the amount will still be tax free no matter the driven number of kilometers. 
• You cannot choose to give the employee less in payment if the individual get’s the mileage deduction. Diminished payment will make the mileage deduction tax obliged. 
• Expenses for ferry tickets, bridge tolls or parking are not included in the tax free mileage deduction. You can pay these expenses as an attachment or a bill if the employee can deliver the original appendixes to you. 
• You can also read more about how Intempus can deal with your driving registration here.