Lithuania! The land of steaming šakotis (honey cake), frothy Švyturys (beer) and a Baltic coastline to lose yourself along, there’s no wonder it’s quickly becoming a major business hub. And, as your company explores new opportunities, sending employees on business trips to Lithuania is likely becoming a distinct possibility. 

But, before your team hits the charming (and sometimes bumpy!) Lithuanian roads, there's one key detail to understand: mileage allowance. In this article, we break down what's covered in mileage allowance in Lithuania, what's not and how to ensure everyone’s on the same page. 

Imkime tai!

How does mileage allowance work in Lithuania?

Mileage allowance is a financial reimbursement system used in Lithuania to compensate employees for the business use of their personal vehicles. It essentially covers the cost of fuel and wear and tear on the car.

Mileage allowance in Lithuania is regulated by the Government of the Republic of Lithuania Resolution No. 526, dated April 29, 2004. This resolution is titled "On the Payment of Daily Allowances and Other Business Travel Expenses" and outlines the rules and procedures for compensating employees for using their vehicles during business trips.

Lithuania (like Latvia, Bulgaria and Romania, to name a few) doesn't have a single, fixed mileage allowance rate. Instead, Resolution No. 526 (April 29, 2004) emphasises fair compensation. This means:

• Companies set their own mileage rates and corporate mileage reimbursement policy
• Car reimbursements realistically reflect the actual fuel costs employees incur for business travel

Let’s look at how mileage rates work in Lithuania in the next section. 

Want to protect your business and empower your employees? Create a clear corporate mileage reimbursement policy with our guide.

What are the mileage allowance rates in Lithuania for 2024?

According to the resolution, individual institutions (companies or organisations) have the authority to set their own mileage allowance rates. This means the rate you receive can vary depending on your employer's policy.

Why the flexibility? Because different cars use different amounts of gas. A fuel-efficient compact car will have lower fuel costs compared to a larger SUV. By allowing companies to set their own rates based on vehicle type and typical fuel consumption (often referenced from the car's manual), the system aims to provide fair compensation for the actual expenses incurred.

What about taxes? The mileage allowance you pay to your employees can potentially be tax-free, up to a certain limit set. This means as an employee on a business trip, you wouldn't have to pay income tax or social security contributions on that portion of the allowance.

However, there are a few key things to remember:

• It's not a guaranteed tax exemption. Unlike some countries (like France, Norway, Poland, Finland, Hungary and Germany to name a few) Lithuania doesn't dictate any single, fixed mileage rates. This means the tax treatment can vary depending on a collective agreement or your employer's policy.
• Fairness matters. The Lithuanian tax authorities expect the mileage allowance to be a reasonable reflection of your typical fuel costs for business travel. Here's where things get more specific:
  • Fuel efficiency: the type of vehicle you use plays a role. A fuel-efficient car will likely have a lower acceptable allowance compared to a larger SUV.
  • Official fuel consumption data: employers consider official fuel consumption data provided by the car manufacturer or referenced in the owner's manual
  • Market fuel prices: current average fuel prices in Lithuania are factored in
• Documentation matters. To ensure the tax-free status, your employer will likely require proper documentation like trip logs and proof of distance travelled.

Always check the details outlined in the employment contract for clarity on the applicable mileage allowance rate and any relevant company policies.

 Our guide to corporate travel policies walks you through how to write a car allowance policy step-by-step.

What is not included in Lithuania’s mileage allowance?

While the daily allowance helps ease the financial burden of business travel in Lithuania, it's important to understand what expenses it doesn't cover. Here's a breakdown:

• Parking fees and tolls: the mileage allowance might cover the increased wear and tear on your car, it wouldn't include the cost of parking at a client meeting or the tolls on a highway. These are separate travel expenses incurred during the trip itself, not directly related to using more fuel or causing more wear and tear on your vehicle.
• Maintenance and repairs: routine maintenance and repairs are your responsibility as the owner. Oil changes, tyre rotations or replacing worn brake pads wouldn't be covered by mileage allowance. These are essential for your car's overall health and not a direct result of the specific business trip.
• Accidents and damages: unfortunately, accidents can happen on business trips. If your car gets into an accident while on a work errand, the mileage allowance wouldn't cover the repair costs. This would likely be handled by your personal car insurance or a separate business insurance policy depending on the specific circumstances.
• Public transport and travel expenses: while mileage allowance reimburses car-related expenses, it doesn't cover alternative forms of travel. Taking the bus, train or other public transportation options wouldn't be reimbursed through mileage allowance. These costs might be handled separately by your company's travel policy.
• Daily allowance: According to recent amendments, the maximum daily allowance rate for business trips within Lithuania is 28 EUR per day. The daily allowances are calculated based on these maximum rates, but they can be lower if specified in collective agreements or internal regulations. However, the amendments state that these rates cannot be lower than 50% of the maximum rates established by the government. This provision ensures that employees receive a minimum level of compensation, regardless of internal company policies.

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