Paying employees for mileage is common practice in companies that allow the use of personal vehicles for business travel. Its tax and accounting treatment must be carried out with precision, as there are significant implications in terms of social security, income tax and corporation tax.
1. Mileage allowance: Remuneration or Expense Reimbursement?
General rule:
Mileage allowance constitutes an expense reimbursement, provided that:
it compensates for the use of a personal vehicle for business travel; and
it complies with legal limits and is duly justified and documented.
When these criteria are met, the amount paid is not considered remuneration and remains exempt from income tax and social security contributions.
2. Legal Exemption Limits
According to the 2025 update, maintained for 2026, payment per kilometre is exempt from income tax and social security contributions up to the following reference values, based on the civil service allowance scheme (Ordinance No. 1553-D/2008, with subsequent updates):
| Type of vehicle | Limit per km | Classification |
| Employee’s own vehicle | €0,40/km | Exempt from income tax and social security up to this amount |
Note: for situations in which the vehicle is rented or provided to the employee, there is no specific legally established value; by analogy, the principle of reimbursement of proven expenses applies, and the amount must be reasonable and justified.
Above these values, the difference is considered income subject to income tax and social security contributions.
3. Conditions for reimbursement
For mileage payments to be accepted as reimbursement of expenses and not as remuneration, the following is required:
a) Documentary justification: identification of the employee, date, origin and destination of the trip, purpose, kilometres travelled, amount per km and total amount payable.
It is recommended to use an internal travel log template, signed by the employee and validated by their line manager.
b) Company interest: the travel must be for professional purposes, such as customer visits, external meetings or training.
c) Employee’s vehicle: the vehicle used may not belong to the company, but must be owned by or legally assigned to the employee.
4. Tax Risks for the Company
a) Reclassification as income: in the absence of sufficient documentation or justification, the Tax Authority (AT) and Social Security may reclassify payments as remuneration, subjecting them retroactively to income tax, contributions and fines.
b) IRC corrections: amounts paid without adequate documentary support or above the legal limits may be considered non-deductible for IRC purposes, with correction of the taxable amount.
c) Inspections and audits: companies that present significant amounts of kilometres paid, without consistent documentation, may be flagged for enhanced control through cross-checking data in e-Fatura and DMR.
5. Best Practices to be Adopted by the Company
- Implement internal travel regulations;
- Require signed and detailed travel reports;
- Monitor the €0.40/km limit;
- Avoid fixed monthly mileage payments, which may be considered remuneration;
- Separate expense reimbursements from salary remuneration for accounting purposes;
- Train employees and HR managers on legal and tax obligations.
6. Final Notes
As a general rule, mileage payments continue to be tax-exempt expense reimbursements, provided they are properly documented and comply with legal limits. Otherwise, they may be considered hidden remuneration, with significant tax and contribution consequences for the company.