Learn the keys to improving the efficient management of your business travel. From understanding what mileage expenses are to implementing an effective per diem management model, learning about the justification process or discovering specialised tools to simplify management, ensure accurate control in your company and maximise efficiency in your business travel. Ensure accurate control in your company and maximise efficiency in your business travel – find out how to increase control and efficiency in your business travel expense management with our guide for 2023!”
1.What are mileage expenses?
Many employees use their own vehicle for business-related travel. This is why the company is responsible for covering all these expenses.
The amount with which the company compensates these travel, wear and tear and consumption costs is known as mileage expenses, which vary according to the policies of each company and/or sector.
1.1 Mileage expenses: Mileage rates in 2023
During the first quarter of 2023, Tickelia conducted a study on business expenses by analysing more than 2 million mileage expenses reported by more than 1800 companies and found that the price of mileage usually ranges from approximately €0.19 to €0.30, with the average being €0.24 .
Thanks to this report, it has been possible to make a comparison of the average that was paid years ago, and an upward trend can be observed. In 2021 the average was 0.23 € and in 2015 it was 0.19 €. The constant rise in fuel prices may be one of the reasons why fuel prices have been increasing over the last few years.
In this regard, it should be borne in mind that in many companies, the price of mileage is paid according to the seniority of the workers or their responsibility in the organisation.
Also, as a curiosity, according to data analysed by Tickelia, the company that paid the most in mileage expenses in 2022 did so at a price of €0.65 per kilometre, far above the average .
As for the amount of mileage expenses, it can change at any time, either by the company’s own decision or due to changes in legislation. But as a general rule, it is updated every year according to the Consumer Price Index (CPI).
However, following the publication in the Official State Gazette on 17 July 2023 of the amount of per diems and allowances for travel expenses in the Personal Income Tax, the value of mileage expenses exempt from it has risen to 0.26€.
This measure means that people who use their private vehicle for work-related journeys will be able to deduct up to €0.26 for each kilometre travelled. This increase in the amount exempt from personal income tax reflects the Treasury’s recognition of the costs associated with business travel and seeks to alleviate the tax burden on taxpayers who incur these expenses.
It is important to note that this modification has direct implications for the tax return, as it will reduce the taxable base and, consequently, the final amount of tax payable.
The Treasury’s decision to increase the figure per kilometre is based on the current context and the repercussions of a war in Ukraine and Russia (discussed in section 1.4 below) .
This conflict has led to a significant increase in petrol and diesel prices, almost doubling their value compared to 18 years ago.
In response to this situation, the Treasury has decided to adjust the per kilometre figure toreflect the real costs associated with the use of vehicles for business travel. This increase is intended to provide appropriate recognition of transport costs and to offer tax relief to taxpayers who make these journeys.
1.2 Compensation for public employees and tax exemption for others: What’s new in the regulatory change?
In the case of public employees, they will be granted a benefit in the form of compensation . On presentation of the relevant supporting documents, they will receive a payment of 0.26 euros for each kilometre travelled, which will be paid into their current account.
On the other hand, for other taxpayers who use their vehicle for work, they can exclude from their personal income tax return the payments they receive as compensation for mileage expenses, up to a maximum of 0.26 euros for each kilometre travelled.
In order to make this effective, proof of these expenses must be presented.
1.3 What expenses are included in the mileage expenses?
As mentioned above, mileage expenses refer to expenses related to the transport of an employee with his or her own vehicle.
These expenses include
- Fuel: fuel consumption costs represent up to 60% of mileage expenses.
- Wear and tear and maintenance costs: this includes changing worn tyres, oil changes, car parts that need to be replaced, etc.
- Car insurance: It is important that the mileage expense covers the proportional part of the monthly, quarterly or annual insurance premium for the private car.
- Vehicle taxes: Other expenses included are taxes related to the private car, of which a proportionate share must also be paid. Examples are registration tax or road tax.
1.4 Which costs are not included in the mileage expenses?
The company is not liable for certain expenses incurred when an employee drives a vehicle. The following cases are excluded from mileage expenses :
- Traffic fines.
- Parking fines.
- Tolls.
- Car parks.
- Trips made with your own vehicle not related to the business.
- Travel costs by public transport, train tickets, plane tickets, etc.
In the case of tolls and car parks, they are not included in mileage expenses because they are already taken into account in another budget item.
Per diems and mileage expenses are expenses that are repeated in all business trips. For this reason, they are usually included in travel expenses or entertainment expenses.
Travel expenses are those strictly related to travel, as the name suggests. These expenses include travel expenses, meals, accommodation, etc.
On the other hand, representation expenses refer to those expenses that are incurred when the company is represented before clients and suppliers. Therefore, these expenses include the travel of an employee to provide training to a client, meeting expenses, etc.
1.5 Consequences of fuel price inflation
Our study on mileage was carried out during the first quarter of 2023. At that time, mileage expenses represented 10% of the total expenses reported by companies.
Other recurring business expenses include car rental (2%), per diems (7%), refuelling (14%), transport (9%), tolls (10%) and restaurants (26%).
Directly related to mileage is the rise in fuel prices, a factor that has forced companies to increase the amount of mileage payments to their employees. Moreover, this rise in fuel prices, as well as the majority of increases in different products, have a globally accepted justification: the war in Ukraine and Russia .
In Spain, as a shock measure in the face of rising fuel prices, the government approved the introduction of an aid of 20 cents per litre. This aid was in force from 1 April to 31 December 2022.
At the beginning of 2023, in the second week of January and no longer able to count on this aid, the price of petrol was recorded at €1.60/litre. In mid-February, the price began to rise and exceed 1.63 €/litre, until today.
Below is a graph showing the evolution of petrol prices in Spain in 2023:
2. Per diem and mileage expense management models
There are several models for managing per diem and mileage expenses. It is the responsibility of the company to choose the one that best suits its interests and the interests of its employees, as well as the needs of the sector or the journeys and trips that its employees usually make.
Below, we explain each of the 3 current models for justifying mileage expenses.
2.1 Management of mileage expenses: fixed justification model
In this model, the company establishes a fixed amount for an expense or a set of expenses.
This model saves the company the investment of time and resources needed to keep track of expenses, facilitating and streamlining the entire process of reviewing, validating and managing mileage expenses.
2.2 Managing mileage expenses: expense justification model
For this expense model, the employee must justify all expenses. After the expenses have been assessed and validated, those expenses that are approved by the administration or the financial department are returned to the employee concerned.
Thanks to this model, there is better monitoring of expenses and the exact amount of expenses incurred by employees can be reimbursed.
2.3 Management of mileage expenses: mixed justification model
As the name suggests, with this model the company takes into account several requirements of the fixed and the expense reimbursement model and chooses the ones it considers appropriate.
The combinations can be very varied:
- Justify only a part of the expenses.
- Set maximum amounts for certain expenses.
- Manage mileage expenses with per diems.
- Manage mileage expenses with receipts.
- Pay the full amount fairly.
- Reimburse the full amount on a rounded basis.
It is up to the company to choose the combination that best suits the needs of the company and its employees.
3. Process for justifying mileage expenses
In the vast majority of companies where expense management is still traditional, full of manual tasks, when it comes to justifying a mileage expense, the process is usually as follows:
- Indicate in the Excel document they use to keep track of expenses (whether monthly, quarterly or any other period in which they decide to do so) the number of kilometres travelled and basic information to verify these expenses: date, company visited, reason for the trip, address of origin and destination, etc.
- Submit this same Excel document to the person in charge, who will review the data and approve the mileage expenses incurred by mobile employees for reimbursement, or if any data is incorrect or disproportionate, it will be rejected.
But thanks to digital and automated travel and expense note management solutions such as Tickelia, this process can be simplified, reducing the time spent to a couple of clicks.
If you want to know more about how Tickelia can help you simplify this process, read on! We explain it in detail below.
4. Settlement of mileage expenses
Both per diems and mileage expenses are compensatory. In other words, mileage expenses incurred by the employee on the move are subsequently reimbursed by the employer.
When reimbursing mileage expenses, the amount is excluded from the salary category. In the case of mileage expenses incurred by the self-employed, the reimbursement of these expenses can be included in the salary.
It is up to the employer to determine the frequency of the reimbursement of mileage expenses: weekly, fortnightly or monthly.
5. Concepts included in the Social Security contribution bases
There are a series of concepts that must be correctly justified. For both per diems and mileage expenses, those included in the social security contribution base are those that exceed:
- €26.68 per day for subsistence expenses without an overnight stay in Spain.
- €48.08 per day for subsistence expenses without an overnight stay outside Spain.
- 53.34 €/day for living expenses with an overnight stay in Spain.
- 91.35 €/day for living expenses with an overnight stay outside Spain.
- 0.23 € on average per kilometre travelled.
6. Income tax exemptions for per diems and mileage expenses
For transport expenses to be exempt from IRPF, a series of requirements must be met. These are:
- The journey must take place outside the usual place of work.
- The journey must take place away from the usual place of residence.
- The trip must take place for professional reasons.
- The trip must take place for a period of less than nine months.
- The maximum payment per kilometre is €0.19/km if the journey is made in a private vehicle.
If the limits are exceeded, the excess must be declared.
7. Advice and recommendations for managing mileage expenses
To summarise, we could say that the most important thing to facilitate the management of daily allowances and mileage expenses is:
- Set up a budget line for mileage expenses.
- Consulting the report developed by Tickelia can help in determining which rates are the most common.
- Inform employeesof the limits .
- Clarity in the collective agreement and in the travel expenses policy.
- Easy access to the collective agreement and travel policy for employees.
- Digitise and automate the travel expense management process.
8. Tools to take mileage expense management to the next level
Regardless of the model chosen by the company to control expenses, there must be good management behind it. For this, expense management tools are the best option.
Tickelia is a business travel and expense note management software that digitises and automates the entire process. Thanks to it, you will be able to have a more agile and simple management of mileage expenses. How?
- By indicating the point of origin and destination in the App from a smartphone. Thanks to the integration with Google Maps, the distance of the journey is calculated automatically.
- By configuring preset routes for journeys that are made on a regular basis, with a fixed number of kilometres.
- By directly indicating the number of kilometres travelled.
In this way, the entire management task is streamlined and simplified both for the mobile worker and for the financial department in charge of managing mileage expenses.
Moreover, with Tickelia’s advance payment management, employees can make their request through the mobile application and receive the indicated amount via SEPA transfer to their Tickelia Visa Card once their request has been approved.
Last but not least, Tickelia also offers a national and international VAT recovery service, through the exchange of receipts to invoices. This allows you to deduct VAT on business expenses, including mileage expenses in the form of receipts and simplified invoices, regardless of the format of the documents (physical or digital).
