Tax-free mileage allowance, digital mileage book and everything in between
Most companies pay tax-free mileage allowance to employees for business related mileage, driven in their own vehicle according to the tax authorities’ fixed rates. Mileage allowance helps covering some of your employee’s costs related to the vehicle – such as gas, maintenance, depreciation, insurance, vehicle tax etc.
If the Danish Customs and Tax Administration (SKAT) knocks on your door and asks for documentation of your employees’ mileage, it’s up to the company to provide this. There’s some conditions and requirements that must be complied with, before the employee is entitled to mileage allowance. If all conditions aren’t met, the employee must pay tax of the amount.
You’re probably aware of this if you’re in charge of, or work within the finance or HR department. If you’re considering replacing the old school mileage book with a digital one, then you’ll need to check which supplier who’s able to meet the requirements.
What are the requirements from SKAT (Danish regulation)?
Let’s go through SKAT’s requirements one by one. It’s an employer responsibility to keep control with the following:
The purpose of the mileage– the specific task to which the mileage is reported.
The destination with any sub-destinations – the start and end address of the mileage as well as any stops on the route.
The date – the date must be registered.
Number of kilometers driven – the exact number of kilometers must be specified as the calculation is determined by this.
Calculation by rates – the rate of mileage allowance varies at 20.000 km per year. In 2020, a tax-free payment of DKK 3.52 per km will be paid. However, if the employee exceeds 20.000 km annually the rate for the excess part is DKK 1.96 per km.
The mileage must be conducted in the employee’s own vehicle – the mileage must be driven in own vehicle in order to qualify for mileage allowance. A partner’s vehicle falls into the same category, if you share finances.
There’re also a few other things that you and your employees need to be aware of. This is for example the 60-day rule and the fact, that an employee isn’t eligible to receive both mileage reimbursement and tax deduction for transport. You can read more about this here.
A digital mileage book is a real time-saver
Many companies are using an old school mileage book and Excel sheets to record mileage. This manual workflow works. But it’s not anyway near being efficient. Neither for your employees nor your finance department. Also, the traditional mileage book has some pitfalls. Typing errors, forgotten routes and busyness is often leading to both small and large errors, which ultimately can end up being expensive for both the employee and the company.
The digital transformation is rolling and thus it makes sense to examine whether the mileage book can be digitized. And yes, it can easily be digitized. There’re many excellent suppliers out there who specializes in this. We’ve got the feature “Mileage” in our own mobile app, Acubiz One. Amongst other benefits, it has made a huge difference for Dansk Brandteknik. They’ve saved a massive 50 % of the time, they previously used on mileage registration.
“Does Acubiz comply with SKAT’s requirements?”
We’re often asked if Acubiz complies with SKAT’s requirements and guidelines for mileage records. We don’t have a certificate to prove this, since SKAT don’t issue such, but we meet the requirements. Let’s have a look at how:
There’re few things to enter manually in the mobile app, Acubiz One. This includes the purpose, date and start and end addresses. When this is typed in, the mileage registration is pretty much handling itself. You need to select the route and based on this the distance is calculated automatically. The same goes for the calculation of the mileage allowance. This means that Acubiz will adjust the calculation depending on whether the employee has driven above or below 20.000 km per year. Our solution remembers the license plate, and this documents that the mileage has happened in the employee’s own vehicle. The license plate can be changed.
In addition to the legal requirements, the mileage can, for example, be allocated to the company’s different projects (depends on the solution configuration). This is greatly appreciated by the finance department, as it provides them with a better overview and a hassle-free cost allocation. Also, if your business has operation or employees abroad, you’ll need to consider, that other countries have different rules and regulations for mileage reimbursement. It that case, do yourself a favor, and look for a solution that supports multiple country rules. Acubiz supports country specific rules for mileage allowance across 21 countries, and for 12 of these, we’re updating the rules and rates 100 % automatically.
If you’re self-employed or just want an overview of your mileage, we’re also offering our single-user tool, Acubiz Professional (https://www.acubiz.com/solutions/acubiz-professional/). It’s a free solution, that allow users to register and generate reports of expenses and mileage, that then can be shared with a temporary employer, a manager, a bookkeeper, an accountant or whoever else the user might find relevant.
Consider whether the mileage book should be a part of an Expense Management system
We work within the field of Expense Management, which is a collective term for a range of sub-processes in relation to the processing, management and control of business-related expenses registered by a company’s employees. Mileage registration is a part of this overall process.
If your company is considering an investment in a digital mileage book, I’m confident that you’ll be delighted. Both your employees and your finance department. Your employees can register their mileage faster and much easier. Your finance department can export the valid and necessary data to document the mileage reimbursement, both towards the Tax authorities and to a salary system.
If your employees have a lot travel activity, they’re likely to have a lot of other expenses as well.
Therefore, I urge you to think one step further. Mileage registration is just one part of the whole Expense Management process and it makes sense to consolidate all components in one solution. The synergy effects of this is substantial and it’ll create value across the entire organization. Take this into account if you’re looking for a digital mileage book.