Mileage Expenses for Businesses 2023: The Complete Guide!
Managing mileage expenses in a company can be complex to understand and handle. Rates, procedures, optimization—many questions arise! In this article, we provide answers to all your queries.
- What Are Mileage Expenses?
- What Is the Mileage Allowance Rate?
- Reimbursement of Mileage Expenses by the Company: Modalities
- Company Mileage Expenses: Reimbursement for Car Travel
- Company Mileage Expenses: How to Optimize Them?
What Are Mileage Expenses?
Definition of Mileage Expenses
Mileage expenses refer to the amount reimbursed by the company to its employees who use their personal vehicles for business travel. Instead of providing a fixed allowance for travel expenses, the company calculates reimbursement based on the number of kilometers driven for business purposes, following the current tax mileage rate. This ensures fair reimbursement, taking into account the actual distance traveled for company purposes.
How to Calculate Mileage Expenses for a Company?
Calculating mileage expenses typically relies on the official tax mileage rate established by the relevant tax authorities in the respective country. This rate sets the amount reimbursable per kilometer. To calculate mileage expenses, you can follow these steps:
- Record Kilometers Driven: Maintain an accurate record of all trips made for business purposes, noting the number of kilometers driven for each journey.
- Check the Tax Mileage Rate: Familiarize yourself with the current tax mileage rate for the fiscal year. This rate determines the reimbursement rate per kilometer.
- Calculate Reimbursement: Multiply the total number of kilometers driven for business purposes by the reimbursement rate per kilometer specified in the tax mileage rate. The result of this calculation will provide you with the total mileage expenses to be reimbursed.
Who Can Benefit from Mileage Expenses?
Mileage expenses are not exclusive to employees who are constantly on the move. Generally, any employee required to undertake business travel using their personal vehicle can be eligible for mileage expense reimbursement. This can include salespeople, representatives, field technicians, and other professionals whose roles involve regular travel on behalf of the company.
It’s important to note that the rules and conditions for eligibility for mileage expenses may vary from one country to another and depend on the internal policies of the company. Therefore, it’s advisable to refer to your specific company’s guidelines and local tax authorities to ensure compliance with all required criteria for claiming these reimbursements.
What Is the Mileage Allowance Rate?
The mileage allowance rate is a regulated system used to establish a scale for reimbursing travel expenses based on the distance traveled. It is established by the tax authorities and is used for business trips made with a personal vehicle or one provided by the company.
It’s important to note that the mileage allowance rate may be revised each year, so it’s crucial to stay informed about any updates to ensure compliance with your reimbursements.
In France, the mileage allowance rate generally applies to cars and motorized two-wheelers. For other types of vehicles, such as vans or heavy trucks, specific rules may apply.
The rate is determined based on the number of kilometers traveled during your business trips. Specifically, it takes into account two main components:
- The fiscal horsepower of the vehicle: The rate distinguishes between different ranges of fiscal horsepower, ranging from 3 to 16 fiscal horsepower. The higher the fiscal horsepower of the vehicle, the higher the per-kilometer cost.
- The number of kilometers traveled: The rate sets out mileage tiers where the cost per kilometer decreases as the number of kilometers increases. This encourages fuel economy and responsible vehicle use.
It’s essential to adhere to the official mileage allowance rate to avoid any risk of tax adjustments. In case of an audit, the tax authorities may verify whether the reimbursements made by the company comply with the current rate.”
Reimbursement of Mileage Expenses by the Company: Terms and Conditions
Definition of Business Travel
It is essential for the company to clearly define what it considers eligible business travel for reimbursement of mileage expenses. Typically, journeys between home and the workplace are not considered, but trips to meet clients, suppliers, or to carry out professional missions are usually reimbursed.
Documentation and Recording of Travel
To facilitate the reimbursement process, it is important to keep all documentation related to business travel. This includes fuel invoices, toll receipts, parking receipts, as well as an accurate record of the kilometers traveled for each business trip. Maintaining a travel logbook or using dedicated mobile applications can greatly simplify the recording of this information.
It may happen that the amount obtained by applying the tax scale does not fully cover the actual expenses. In such cases, some companies offer supplementary reimbursement to partially or fully compensate for the difference between actual expenses and those reimbursed according to the tax scale. The terms of this supplementary reimbursement may vary depending on each company’s policy.
Reimbursement of mileage expenses can be carried out in different ways. Some companies prefer to make monthly or quarterly reimbursements, while others may opt for a one-time reimbursement after the submission of documentation. Some companies also use fuel cards or specific payment systems to facilitate the reimbursement process.
Company Mileage Expenses: Reimbursement of Car Travel Expenses
- Reimbursement of Actual Expenses:
This method involves keeping a detailed record of all costs related to the use of the car for business purposes. This includes fuel costs, tolls, maintenance expenses, specific auto insurance premiums for business travel, etc. It is necessary to retain all receipts for these expenses to be able to present them in case of a tax audit.
The advantage of this approach is that reimbursement is based on the actual costs incurred, which can be advantageous for long distances or significant expenses related to the company vehicle.
- Flat Rate Reimbursement
In this approach, the company establishes a flat rate for each kilometer traveled for business purposes. This rate is generally based on the current tax scales for mileage expenses. The main advantage of this method is its simplicity. There is no need to keep all receipts for expenses, but it is important to maintain an accurate record of business travel.
Company Mileage Expenses: How to Optimize Them
For mobile professionals, managing mileage expenses is an important concern. To optimize this management, adopting an organized and rigorous system is essential. This involves establishing a clear and consistent expense policy within the company.
We recommend defining an expense policy that regulates the business expenses of employees. This document should address the following points:
- Types of expenses eligible for reimbursement
- Procedures to follow to obtain expense reimbursement, including formal rules, the importance of documentation, and deadlines to be respected
- Legal rules applicable to mileage expenses
- Consequences of non-compliance with requirements (delay in processing, non-reimbursement, etc.).
To facilitate employees’ understanding of this policy, prefer clear and concise wording. Avoid overly complex, superfluous, and unnecessarily restrictive rules. Simplicity is key. You can organize the document into sections, for example, a section dedicated to mileage expenses and another for meal expenses. By opting for a well-defined expense policy, you will save time during the reimbursement process and reduce the risk of audits during an inspection.
Another approach to optimize mileage expense management is to choose a flat-rate reimbursement. Indeed, it is possible to reimburse business expenses in a flat-rate manner, in the form of lump-sum allowances or bonuses. This choice generally lies with the company, but we recommend consulting your employees before making a decision. Furthermore, it is important to note that the law sets limits on expenses eligible for flat-rate reimbursement, including mileage expenses, meal expenses, and long-distance travel expenses. With flat-rate reimbursement, it is generally not necessary to justify the expenses reimbursed, unless their value exceeds the limit set by the tax authorities. In that case, it is sufficient to demonstrate that the allowances correspond to actual situations.