With your own car
If you as employer asks your employee to use his own car, it is logical that you pay an allowance for the employee’s expenses. As a general rule the employee has to prove these expenses. But for practical reasons the tax authorities accept that you make a lump sum calculation.
This allowance can however not exceed a certain maximum amount. And this maximum amount is the lump sum mileage allowance federal civil servants receive when they use their private car for professional purposes. For the period from 1 July 2019 until 30 June 2020 the maximum amount is 0,3653 euro/kilometer (compared to 0,3573 euro/kilometer for last year).
Just to be clear: using the private car for movements between home and the fixed place of work are no professional movements! These movements do not qualify and if an allowance is paid for them, these allowances are then considered as salary (be it that certain exemptions may apply).
Maximum 24.000 km
With respect to movements made on behalf of the employer, the tax authorities accept that the lump sum allowance is used as long as the total distance does not exceed 24.000 km. Above 24.000 km the tax authorities will no longer accept the lump sum calculation and proof will have to be provided. The 0,3652 euro/km is ‘only’ a maximum amount. In case the employee can prove higher costs, you can pay a higher allowance, but still with the necessary proof.
Note that these rules also apply for social security purposes. In general all allowances which are paid to an employee are considered to be salary. Expenses proper to the employer are removed from the salary and for mileage allowances you can use the same lump sum amount as for tax purposes.
Can you as employer deduct this allowance?
According to the tax authorities, the lump sum allowance consists out of two parts: one part is for fuel and the other part is for all other expenses (a.o. depreciations and maintenance). The ratio between both is fixed to 30% fuel and 70% other costs. This is important because both parts have different deduction rules. For corporate tax these are:
- fuel expenditure (30% of the allowance) is 75% deductible; and
- other costs (70% of the allowance) are deductible according to the CO2 emission and the fuel type. E.g. a diesel car with a CO2 emission of 106 gr/km up to 115 gr/km has a 80% deduction while with an emission of 116 gr/km up to 145 gr/km the deduction is 75%.
But as from 1 January 2020 (tax year 2021) there will be important changes with respect to the deduction of car expenditure (fuel and others). As from then car costs are deductible according to the following formula:
120% – (0,5% x coefficient x CO2 emission (in gr/km)).
The coefficient is ‘1’ for diesel cars; ‘0,90’ for cars running on natural gas (with a power of less than 12 tax horse powers) and ‘0,95’ for cars with another engine (petrol, electric, LPG, …). The deduction calculated following this formula cannot be higher than 100% and not lower than 50% (40% if the car has an emission of more than 200 gr/km CO2).
The distinction between fuel costs and other costs is then no longer relevant.
Apart from the above the mileage allowance for federal civil servants is also used for another lump sum calculation.
The capacity of volunteer does not allow to be paid for the rendered services. Only indemnities are allowed. Next to the general maximum per month and per year a separate threshold applies for traveling expenses. The threshold is set at 2.000 km per year per volunteer (there is no threshold for volunteers having the transport of persons as their activity). Also in this case the allowance cannot exceed the lump sum allowance for federal civil servants.
The price of convenience
The lump sum calculation has the big advantage that employer and employee can suffice with the proof of the mileage. Moreover the allowance of 0,3653 euro/km is not ridiculously low. As with every every lump sum calculation there will be winners and losers, but this is in any case a simple and practical method.