Mileage expenses: definition and basic rules
Whether we are entrepreneurs or employees, we are all affected by mileage expenses, whether they are calculated or reimbursed.
Whether you're looking for a definition of mileage allowance (IK) or a tax rate for mileage allowance, the French government will be happy to provide you with information on this tax break for business activities.
Follow the guide!
What are mileage expenses?
Kilometric expenses: definition and scale
Mileage-based expenses are part of business expenses.
They cover the actual cost of using a personal vehicle for business travel, for example to and from a seminar, a worksite or an off-site meeting.
The amount of the mileage allowance, set out in the tax authorities' mileage scale (updated each year), covers the costs of :
- wear and tear of the vehicle
- fuel
- insurance,
and is calculated on the basis of the distance travelled and the type of vehicle (horsepower).
These costs are exempt from contributions.
🔎 On a business expense statement , mileage allowances and ancillary expenses may be included side by side, in particular :
- parking charges,
- toll charges.
Mileage-based expenses: conditions
All vehicles, including electric vehicles, are covered by mileage expenses:
- cars
- motorbikes
- scooters
- bicycles, etc.
The vehicle may be owned, hired or loaned by the employee. But it is up to the employer to provide proof of the business use of the personal vehicle, with supporting documents.
As for employees, all of them without exception, even trainees and volunteers, may incur mileage expenses and claim reimbursement.
Calculating actual costs between home and work
Mileage expenses also apply to journeys between home and work, up to a limit of 80 km per day AR (specific exceptions for certain activities are provided for by law).
When filing their tax returns, some employees prefer to use theUrssaf mileage scale to deduct their actual expenses instead of the flat-rate deduction (abatement) of 10%, when this is less advantageous.
In this way, these mileage costs are deducted from taxable income when they opt to be taxed on actual expenses, or "au réel" as it is often called.
However, any tax reduction obtained must be justifiable. The General Tax Code stipulates that supporting documents may be requested.
Once again, the employer may also be asked to provide proof of :
- the means of transport used by the employee,
- the distance between home and work,
- the tax rating of the vehicle
- the number of journeys made each month.
Calculating business expenses and mileage allowances
A vehicle costs more than just petrol consumption over a given number of kilometres.
The costs to be taken into account include :
- annual depreciation
- the rental charge if the car has been leased, for example,
- interest on the loan if the vehicle was bought on credit,
- the insurance premium,
- fuel costs,
- parking and garage expenses,
- maintenance and repair costs, including tyres....
What's more, some entrepreneurs have a vehicle for mixed personal and professional use. They may prefer to use the tax scale for fuel expenses rather than the scale for mileage expenses, after determining a split between business and personal use. In this case, all expenses are declared on an actual basis, including fuel, tolls, insurance, etc.
But whatever the calculation method and the most advantageous scale, equipping yourself with a professional tool can save you precious time by :
- connecting your Google calendar or Outlook to an application that imports appointments,
- automatically calculating distances and mileage,
- generating expense reports in just a few clicks.
You can try out an expense report management application like Izika, or read the following article to find out more 😉
Article translated from French