Tax-free compensation for travel expenses paid in addition to salary

The person performing the work and the client agree on the price of the assignment as the performance of the work, in addition to which the client pays any compensation for travel expenses.

Example 1:

In this case, it has been agreed that the work performance is €300, and on top of this, the client pays compensation for travel costs.

Invoice lines:

Work performance: €300.00
Travels: 238 km €102.34
Total: €402.34

Conclusion: This is a tax-free travel expense that is invoiced to the customer in addition to the work performance.

Example 2:
In this case, it is obvious that the total invoice has been agreed to be €400 and the person performing the work has then itemized the travel costs on the invoice, although in reality the total price has been agreed upon. Reimbursements for travel expenses are not tax-free!

Invoice lines:
Work performance: €297.66
Travels: 238 km €102.34
Total: €400.00

Conclusion: The final amount of the invoice is an even number, and the price of the work is an illogical decimal number; this would be a peculiar coincidence. So it is a total invoicing, where only the part of the travel costs is itemized on the invoice. This is not really a situation where compensation for travel expenses paid in addition to work performance has been agreed upon.

Reimbursements for travel expenses cannot then be paid tax-free, but reimbursements for travel expenses are paid without withholding and are taxable income for the recipient.

In order for the invoicing service to be able to pay tax-free compensation for travel expenses to the light entrepreneur, it must know that the matter has been agreed in the commission agreement between the light entrepreneur and the customer. For this reason, travel costs should always be added to the invoice as a separate line. They cannot be paid tax-free if they are included in the contract price of the invoice without their own invoice line.

Note: When you add travel expenses in the UKKO service, they are automatically added to the invoice as a separate line. Please make sure that you have agreed on the reimbursement of travel costs in advance with your client and, after adding the travel costs, check that the invoice information and the total amount match the assignment contract.