What is Mileage Compensation?

Mileage compensation is a financial compensation that you are entitled to cover car costs associated with business trips. It is usually based on the number of miles driven and a fixed price per mile. Most often, the employer pays the mileage allowance on an ongoing basis, but you can always make a deduction of SEK 25 per mile driven in your income tax return in order to recover the money for travel expenses afterwards. In addition, when you are on business, you are often entitled to tax-free subsistence.

Tax-free limits on mile allowance 2024

In 2023, the limit on the tax-free amount of mile allowance was raised to better match the current economic situation. The amount was increased from SEK 18.50 per mile to SEK 25 per mile. In 2024, however, no increases have been introduced. This means that when you travel in the service with own car are entitled to a tax-free allowance of 25 kr per mile.

However, the rules differ between private car and service car or benefit car:

• Private car: 25 SEK/mile (regardless of fuel)
• Benefit car: 12 SEK/mile (diesel, petrol or other fuel)
• Electric preferential car: SEK 9.50/mile (applies to electric cars powered 100% by electricity)

These amounts are standardised and determined by the Swedish Tax Agency, and are intended to cover the fuel, wear and tear and other costs incurred when travelling in the service.

Taxable Mile Allowance

It is not uncommon to agree on a higher mileage allowance, as the car, depending on the model, often costs more than SEK 25 per mile. Union recommends that employers pay at least SEK 19.50 per mile driven in addition to the tax-free amount.

‍

However, when agreeing on a higher remuneration than the Tax Agency's flat rate, it is important to remember that the part that exceeds the tax-free amount is considered a wage surcharge, which means that the employer has to pay employer contributions and that the employee will be taxed. If a driver receives, for example, SEK 35 in mileage compensation from his employer, SEK 25 of this is tax-free, while the remaining SEK 10 is taxable.

‍

Invoice the customer for the travel expenses

As we mentioned, the real cost per mile driven is often significantly higher than $25. Exactly how high it is depends very much on the circumstances, but a common markup to make on the invoice for travel expenses is usually somewhere around 50 SEK per mile. If you travel as an entrepreneur in the service with your private car, you will still be able to collect 25 SEK tax-free from this 50 SEK, while the remaining amount - in this case - 25 SEK is counted as income in the company.

‍

‍

How to post the mile allowance

To take an example, we can assume that as an entrepreneur you need to travel 40 miles to fulfill a mission. You then agree with your customer that you bill them 2000 kr plus VAT (40 x 50) for your car costs. This means that you can withdraw 1000 kr (25 x 40) tax-free, while the other 1000 kr (25 x40) counts as income in your company.

‍

• Revenue, that is 2000 kr, is recorded as credit on 3041 and debit on account 1930. The outgoing VAT is recorded as usual, credit of 2611 and debit of account 1930.
• The tax-free allowance, therefore 1000 kr, is recorded as a debit on account 7331 and credit on account 1930.

‍

Also, do not forget that you can receive other compensation for, for example, parking fees, which you deduct as ordinary expenses in the accounting.

‍

{{cta}}

‍

Driving log and mile allowance

In tax audits, the so-called reverse burden of proof applies, which means that it is up to you who are claiming mileage compensation to prove that you are doing the right thing. Thus, you need to be able to prove that the distance traveled has actually been done within the business, which in turn means that it is very important to keep a driving record. In the driving record, you should show, among other things:

‍

• Which organization you visit
• Purpose of the trip
• Measuring position
• Number of miles driven

‍

For more information on how to fill out the journal correctly, we refer you to the Tax Agency guide.

‍

Mileage allowance for travel to and from work

When it comes to travel to and from work, you have the right to deduct the part of the expenses that exceed SEK 11,000. However, for this deduction to be applicable, it is necessary, inter alia, to:

• It should be at least 5 kilometers to the workplace
• You will save at least 2 hours per day by taking the car instead of municipal transport.
• However, if there are no general means of communication for the route, it is sufficient to be only 2 km to the service point.

For consultants who work for a long time in the same workplace, it may be worth pointing out that this workplace will count as your main place of work, and that you will therefore need to comply with the above criteria in order to be entitled to tax-free mileage allowance. To find out exactly what applies to you and your company, we recommend reading Tax Agency website or contact an authorized accounting consultant.

‍

{{cta-2}}