Luxembourg’s charming villages and vibrant cities are perfect for business trips. But if your employee uses their private car for these journeys, understanding mileage allowance rules becomes crucial.Get it wrong, and your business could face penalties or disgruntled employees feeling shortchanged. On the other hand, overpay, and you're essentially giving away money that could be better invested elsewhere. In this guide, we break down the rates and explain the rules, all while keeping your employees happy and company finances healthy.
How does mileage allowance work in Luxembourg?
The mileage allowance in Luxembourg is a flat-rate mileage allowance for employees who use their private vehicles for business travel. This allowance costs like fuel, maintenance, depreciation and more. Here are some key points: Employees cannot deduct actual expenses higher than this travel allowance. In Luxembourg specifically, the allowance amount is calculated pro-rata for employees not taxed for the full year.
- The allowance rate is a fixed €0.30 per kilometre, regardless of the number of kilometres completed or the type of vehicle used
- This €0.30 per km allowance is tax-free for the employee. Any amount paid above €0.30 per km becomes taxable compensation subject to income tax and social security contributions.
- Employers do not need to collect receipts or documentation of actual costs from employees for this tax-free mileage allowance, up to €0.30 per kilometre
What are the mileage allowance rates in Luxembourg for 2024?
The mileage allowance rates in Luxembourg for 2024 are structured to accommodate business travel via private cars and public transport.
Private Cars
Effective from January 1, 2024, the mileage allowance for using private vehicles for business travel is uniformly set at €0.30 per kilometre across all vehicle types—including compact, SUV, electric, hybrid or any other model. This standardised rate simplifies the administrative process for both employers and employees. Similar to Croatia (€0.27), Czech Republic (CZK 4.90 per km), Portugal (€0.36), Slovakia (€0.193), Slovenia (€0.43), and Spain (€0.19), where flat-rates are also used for all vehicle types.Note: Some other countries like Norway, Germany, Belgium and the Netherlands have different rates based on vehicle types or engine capacity.Here’s a quick calculation based on the distance travelled:
Distance Travelled (km)
Reimbursement @ €0.30/km
Tax Status
50 km
€15.00
Tax-free up to €15.00
150 km
€45.00
Tax-free up to €45.00
300 km
€90.00
Tax-free up to €90.00
Tax Status: This allowance is tax-free up to the standard rate of €0.30 per kilometre. Any reimbursement above this rate would be taxable income. So if the employer’s reimbursement rate is €0.40 per kilometre, the excess rate taxable is €0.40 - €0.30 = €0.10 per kilometre.
Company cars as benefit in kind
When an employee is provided with a company car for their professional and private use, the car is considered a ‘benefit in kind’. This means the use of the car is valued as part of the employee's compensation and is subject to taxation under income from employment, along with social security contributions.Starting from January 1, 2025, Luxembourg will implement a simplified rate for calculating the taxable benefit of company cars based on the vehicle type (engine) and CO2 emissions of the vehicle. This is intended to encourage the use of environmentally-friendly vehicles.Here’s a quick overview of the company car benefit in kind rates from 2025:
Vehicle type
Electric consumption
ATN rate (benefit in kind)
Description
Pure electric cars
Up to 18 kWh/100km
1%
Low-consumption electric vehicles benefit from a lower tax rate to encourage their use
Pure electric cars
More than 18 kWh/100km
1.2%
Higher consumption electric vehicles incur a slightly higher tax rate due to their greater energy use
Hydrogen Fuel Cell Vehicles
N/A
1%
Hydrogen vehicles are grouped with low-consumption electrics for their zero emissions
Other Engines (Petrol, diesel, CNG, LPG and all types of hybrid and plug-in hybrid engines)
N/A
2%
Traditional and hybrid engines have a higher rate to promote a shift towards zero-emission vehicles
Public means of transport reimbursement for business trips
Since March 2020, all modes of public transport in Luxembourg—buses, trains, trams and funiculars—have been completely free for everyone, including residents and tourists. This means that: Costs for cross-border travel tickets in Luxembourg:
- No tickets or passes are required to use public buses, trains (2nd class), trams and funiculars within Luxembourg
- The only exceptions where fees still apply are for 1st class train travel. This includes cross-border routes into neighbouring European countries like Belgium, France and Germany based on two pricing zones (RegioZone 1 and 2)
Ticket Type
RegioZone 1
(Belgium, France and Germany)
RegioZone 2
(Distant German destinations of Dillingen, Saarlouis and Saarbrücken)
2-hour ticket
€3
€5
1-day ticket
€5
€9
Monthly pass
€40
€85
Annual pass
€360
€750
What is not included in the mileage allowance?
The travel expenses that are not included or covered under this mileage allowance for Luxembourg are: Here’s a quick look at per diem rates for business travel within Luxembourg:
- Miscellaneous travel-related expenses: this includes parking fees, tolls and other incidental costs incurred during travel. These are typically reimbursed based on actual expenses and supported by receipts or proof of purchase.
- Per diem allowances: these are fixed daily allowances for accommodation and meal expenses during business trips and do not require submission of receipts.
Type of Expense
Amount
Details
Day Compensation
€14
Intended to cover meal expenses for a full day.
Night Compensation
€56
Includes accommodation costs, breakfast, service and related taxes.
Simplify business travel and go green with TravelPerk
Business trips in Luxembourg are a breeze with mileage allowances in place. But, managing individual expense reports, finding car rentals, keeping tabs on a travelling team? It soon becomes far from breezy. TravelPerk offers a user-friendly solution that simplifies every aspect of corporate travel—from booking
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Frequently asked questions about mileage allowance for Luxembourg
How to file a mileage allowance claim in Luxembourg?
Can I claim mileage allowance for both business and personal trips in Luxembourg?
Is there a limit to the number of kilometres I can claim for business trips in Luxembourg?
How can I maximise tax relief on travel expenses in Luxembourg?
What is the HMRC equivalent in Luxembourg?
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