That is the headline appearing in various media outlets. The reason for this cry for help is, of course, the sharp rise in fuel prices. What is the situation (from a tax perspective) regarding travel allowances?
€0.19/km
Many people are aware that travel expenses can be reimbursed to employees tax-free up to a maximum of €0.19 per kilometre. This allowance may be paid tax-free, regardless of the employee’s mode of transport, for both business travel and commuting. Private journeys, of course, cannot be reimbursed tax-free. The tax-free amount of €0.19 per kilometre covers all costs associated with the journey, including, for example, car parking charges, as well as tolls and ferry fares.
The Rutte IV Cabinet has announced that it will increase the amount of the tax-free mileage allowance. This will be implemented at some point during the term of office. The increase, to be implemented in two stages, will amount to no more than a few cents. Such an increase is out of proportion to the current rise in fuel prices, and we will probably have to wait a few more years for it.
If the employer opts for a different method of reimbursing travel expenses, the tax-free limit of €0.19 per kilometre still applies. Another way of reimbursing travel expenses is, for example, for the employer to reimburse the employee for fuel or to provide it to them.
More than €0.19?
A frequently asked question is whether an employer may pay more than €0.19 per kilometre. Of course they may, but in that case the amount exceeding €0.19 per kilometre is treated as part of the employee’s wages and is subject to payroll tax. The main rule regarding income tax is that the employee is liable for this tax. However, the employer may also choose to bear the tax. This can be done by designating the portion of the travel allowance exceeding €0.19 as ‘final levy income’. Insofar as this amount falls within the ‘free space’ of the work-related expenses allowance, no income tax is payable. The employer pays 80% payroll tax on the amount by which the work-related expenses allowance is exceeded. If the employer does not designate the payroll tax for which they are liable as a final levy component, the payroll tax due is added to the gross salary.
Does the employer have to pay more than €0.19 per kilometre for travel expenses? No, unless this has been agreed in the employment contract, the collective labour agreement or other (collective) agreements. If a higher travel allowance has been agreed in the collective labour agreement, this higher amount is not automatically tax-free; instead, income tax must be paid on the amount exceeding €0.19 per kilometre.
Public transport
An employee who travels by public transport may be reimbursed for the actual costs or have these costs met, tax-free. This also applies here to business travel and to commuting. In section 23.2, the Payroll tax handbook explains how the reimbursement or provision of public transport season tickets is handled.
Employees who commute to work by public transport and receive no (or only a limited) allowance from their employer for this may claim the travel allowance claim.