If an employee uses his private vehicle for business purposes, he is entitled to a compensation that is borne by the employer.

Option 1: Mileage allowance

As from 1 July 2011, the amount of the mileage allowance has been set to EUR 0.3352 per kilometre. It concerns the amount granted to an employee who uses his own vehicle to make a trip on behalf of his employer. This amount is valid for the period from 1/07/2011 to 30/06/2012.

The mileage allowance is neither subject to social security contributions nor to payroll tax. If the compensations are higher than the fixed amount, it is considered as a form of remuneration and the employee will be charged for a benefit in kind. The employer is due to pay social security contributions on this amount.

Taxation employee
As the employee has been travelling for business purposes, the reimbursement is entirely tax-free.

Taxation employer
This cost will be recorded by the accounting as vehicle cost. The tax authorities estimate the cost of the fuel consumption (within the fixed mileage allowance) at 30%. The other vehicle costs are estimated at 70%. These costs are 75% tax deductible (the deductibility of the fuel expenses is since 01/01/2010 limited to 75%).

Another possibility is granting a fuel card.

Option 2: Fuel card

If the employee can benefit from a fuel card, the actual advantage of such card must be estimated. How is this done? Both the private use and the monthly taxable benefit in kind have to be established. This can be calculated on the basis of the fuel invoice.
If an employee only uses the fuel card for business trips, no taxable benefit will be charged.

Taxation employee
For the employee, business trips are completely tax-free. However, the employer has to mention the fuel part for both private and commuter traffic on the salary slip as a benefit in kind. As such, the employee will be taxed on this amount.

Taxation employer
For the employer, the employee’s fuel consumption for business purposes is 100% tax deductible (the VAT included is only 50% recoverable through the VAT declaration). The VAT part that cannot be recovered through the VAT declaration is 100% tax deductible.

The remaining part of the fuel invoice is considered as a form of remuneration. The employer has to mention this benefit in kind on the employee’s salary slip. The employer must also pay the applicable social security contributions.

For both the mileage allowance and the use of the fuel card, it is extremely important for the employer to keep a detailed record of the exact number of kilometres that have been driven for business purposes.
It is equally important to record the place of departure and arrival for each journey. Recently, these data have been requested increasingly often during social security investigations.