Light entrepreneur’s kilometre allowance
In many fields, the work may require travelling long distances, as the work locations change regularly. Various travel costs may build up to be a significant expense in daily life, which is why tax-exempt reimbursements are important. Tax-exempt reimbursements, such as kilometre allowance and daily allowance, reimburse travel costs for both employees and light entrepreneurs. Learn more about the travel expense practices that pertain to light entrepreneurs.
As an employee, receiving travel allowance is simple, as many employers have their own practices regarding reimbursement of these costs. However, you can also benefit from tax-exempt reimbursement of travel expenses as a light entrepreneur as well.
As a light entrepreneur, however, you must take into account a few things in order to make use of tax-exempt travel allowances such as kilometre allowance and daily allowance. First, it is a good idea to agree with the customer on charging them for any possible kilometre allowance and daily allowance in addition to the work done.
You must clearly itemise the invoice you send to the customer, so that it shows your fee, kilometre allowance, as well as any possible daily allowance. In doing this, the light entrepreneur service can pay you tax-exempt reimbursements for your travel expenses.
If you have not separately agreed with your customer on the payment of tax-exempt allowances and their itemisation on the invoice, the Finnish Tax Administration will interpret them as taxable income, even if the allowances are included in the fee you charged.
If your business travel is in an urban area or otherwise within the operating area of public transportation, you can travel in a tax-effective manner by using public transport. By using a train or bus, you can claim tax-exempt reimbursement for the tickets your have purchased for public transport with the payment receipt.
It is not possible to receive kilometre allowance or daily allowance for travel between your own home and your workplace. Instead, you can utilise your right to claim a tax deduction for travel expenses in your personal taxation. By reporting the travel expenses between home and the workplace in your tax return, you will be able to reduce the tax on your earned income. Please note that the deduction is always done in accordance with the cheapest alternative, usually public transportation, even if you needed your own car in your work.
The kilometre allowance is an expense arising from temporary business travel, which is tax-exempt up until a sum determined by the tax authorities. In 2023, the kilometre allowance is €0.53 per kilometre, but the amount of the tax-exempt reimbursement approved by the Finnish Tax Administration is reviewed annually. You can find current information on the amount of the kilometre allowance on the Finnish Tax Administration’s website.
In order to receive the kilometre allowance, you must draw up a travel invoice which shows the start and end times of the trip, its length, the vehicle used and the purpose of the trip. The purpose of the trip does not need to be described in detail, as “client company + work task to be done” is good enough.
The kilometre allowance can also be increased for the same type of vehicle if the work task requires the use of a trailer, driving on a forest road, or other special circumstances determined by the tax authorities.
Along with kilometre allowance, daily allowance is a tax-exempt travel expense reimbursement approved by the Tax Administration. Its purpose is to offer a reasonable compensation for the food and other living expenses that occur during business travel. However, daily allowance does not prevent the paying of kilometre allowance or compensation for accommodation; rather, it is paid in addition to these.
As with kilometre allowance, the amount of the daily allowance is reviewed by the Tax Administration annually. For example, the amount of the partial daily allowance in 2023 is at most €22 per day, and the full daily allowance is at most €48 per day. You can check the tax authorities’ newest decisions on the amount of the daily allowance on the Tax Administration’s website.
In order to receive daily allowance, the destination of the trip must be at least 15 kilometres away from your home or actual workplace. In addition to this, the duration of the trip must be long enough for the tax-exempt daily allowance to be paid:
- For a trip exceeding 6 hours, at most €22 of partial daily allowance can be paid
- For a trip exceeding 10 hours, at most €48 of full daily allowance can be paid
In order to receive the daily allowance, you must make a travel invoice, on the basis of which the kilometre allowance can also be paid. In addition to the time and travel information that entitles you to a kilometre and daily allowance, it is also possible to include payment receipts for the actual travel expenses.
- As a light entrepreneur, you can receive tax-exempt kilometre allowance, daily allowance and other reimbursements for travel expenses.
- Invoicing the travel expenses to the customer as well as itemising the invoice is required for receiving reimbursement.
- In the event that the travel expenses are not invoiced to the customer, you can only deduct them in your taxation as work-related expenses.
- In order to receive a daily allowance or kilometre allowance, the requirements set out by the Finnish Tax Administration must be fulfilled. You must also draw up a travel invoice of the trip for the light entrepreneur service.
Read more in our blog post on a light entrepreneur’s reimbursements (in Finnish).