Allowances for business travel paid by an employer to an employee for a temporary business trip are not taxable income for the employee under certain conditions. This includes allowances for travel expenses, daily allowance, meal allowance, or accommodation allowance, when the employee works in a place outside the permanent workplace, also known as a special work place. However, this rule does not apply to reimbursements for the costs of leisure trips made by the employee during the business trip, which are not tax-exempt.
Regarding the year 2024, the amounts of tax-exempt allowances for travel expenses include the maximum allowance of 57 cents/km for an employee’s business travel using a passenger car, and the maximum per diem amount 51 euros/day.
An employee is considered to be working outside the permanent workplace and to be on a business trip if the work is temporary in the meaning of the Income Tax Act, i.e. the employee’s work in the same work place does not exceed a three-year time limit. In addition, it is required that
- The work place is located more than 100 kilometers from the employee’s home (the distance is calculated using the shortest available public road),
- The employee has stayed overnight in temporary accommodation necessary due to the location of the work place,
- The temporary work is performed in a limited-time worksite, and the performance of the work at that workplace ends when the temporary work is completed.
This rule applies to situations where the employee works, for example, in the premises of a customer company or on a construction site or shipyard, and he does not have a permanent workplace anywhere else. Special work places also include various trade fairs, training, and meeting places where the employee visits occasionally.
The employee is considered to have a permanent work place if the work lasts longer than three years, in which case he can no longer be paid tax-exempt allowances for business travel. If it is already known at the beginning of the work that the work will last for more than three years, the work place becomes a permanent work place from the very beginning of the work.
The time limit calculation is started from the beginning if the employee’s work in the same work place is interrupted continuously for at least six months and the employee works elsewhere during this time.
Mikko Hirvilammi
Financial and Advisory Services Manager
