Tax-free mileage allowances

27 February 2023

Lars Bodín Jacobsen, Director, Tax |
Iben Pedersen, Manager, Tax Legal |

When employees drive their own cars for business purposes, they take on costs. Employers can only cover these costs tax-free for the employees by paying fixed-rate mileage allowances and adhering to certain conditions. 

Below, we explain the rules for “tax-free travel reimbursements” commonly referred to as tax-free mileage allowances.

Privately owned cars

Mileage allowances are only tax-free if employees use their own cars. Cars owned by spouses and partners are considered privately owned cars in this context. However, for unmarried couples, joint economy is a requirement.

Cars registered in parents’ names qualify as privately owned cars provided a de facto ownership can be substantiated by means of account statements showing that all costs are defrayed by the employee.

To learn more download the publication as a PDF