Business travel expenses and mileage in Luxembourg

Business travel expenses and mileage in Luxembourg: who pays what?

Business travel expenses and mileage in Luxembourg follow two separate regimes: the home-to-work journey remains the employee's own cost, offset by a tax allowance, while travel undertaken in the employer's interest is reimbursed on actual expenditure and stays outside taxable salary.

The provision that governs the whole subject is article 95, paragraph 2 of the amended law of 4 December 1967 on income tax. Taxable salaries there include all indemnities, with the exception of non-lump-sum reimbursements of expenses incurred in the exclusive interest of the employer. Every word of that exception matters: the reimbursement must not be a lump sum, and the expense must have been incurred in the employer's exclusive interest.

That wording produces a consequence many employers discover during a tax audit. A round allowance paid every month to cover genuine business travel remains taxable, because it is a lump sum, whereas reimbursing the same amount against receipts and a statement is not. The amount is identical; the tax treatment is the opposite.

The same logic applies upstream of payroll, in the accounting entry. An expense reimbursement is a cost of the company and not an element of remuneration, which places it elsewhere in the profit and loss account than an element of remuneration. A taxable lump sum, by contrast, follows gross salary and its withholding, with the contribution base that goes with it.

Why the home-to-work journey is not a business travel expense in Luxembourg

The home-to-work journey is not a business travel expense in Luxembourg: it is the employee's personal cost, and the legislature offset it with a dedicated flat-rate deduction, the travel expenses of article 105bis of the law on income tax, entered automatically on the tax withholding card.

That allowance is computed in distance units between the municipality of residence and the place of work. The Administration des contributions directes sets the deduction at EUR 99 per distance unit per tax year. The first four units have not counted since 2013, and the deduction is capped at 26 units, that is EUR 2,574 a year. For a non-resident the distance is assessed by analogy, between the main town of the foreign municipality of residence and the point of entry into Luxembourg territory, plus the journey from there to the place of work.

The rule that surprises concerns the employer's contribution. Circular L.I.R. no. 115/6 of 13 July 2018 from the director of taxes characterises that contribution as a salary supplement within the meaning of article 95 of the same law, and notes that it duplicates the flat-rate deduction. The form makes no difference: a lump sum, the reimbursement of a public transport ticket or season pass, or a company car made available for the journey, valued under article 104, paragraph 2. The same text treats collective transport organised by the employer differently: that is not regarded as a taxable benefit.

In other words, paying an employee's transport pass in Luxembourg is a defensible social decision, but it is not tax-neutral, and it is handled on the payslip as a benefit, in the same way as the items described in our article on meal vouchers and benefits in kind.

What mileage allowance may a Luxembourg employer pay?

No Luxembourg mileage scale is binding on the private sector: the practice accepted by the Administration des contributions directes is to reimburse an employee who uses their private car for business travel according to the rates of the mileage allowance set for the official journeys of State agents.

That bridge appears in the circular of the director of taxes of 1 September 2015, which refers expressly to the rates of the mileage allowance applicable to cars used for official journeys, and which recalls in the same breath that the costs of the journey between home and the place of work are covered by the flat-rate deduction of article 105bis. This is why the State scale serves as a de facto reference in private files, without any text imposing it on a commercial company.

The reference scale changed its legal base in 2026, and that is the point to check before setting up an expense policy. The Règlement du Gouvernement en Conseil of 19 June 2015 set the allowance at 30 euro cents per kilometre for official journeys made in a car belonging to the State official or employee.

That framework has been replaced: the Grand Ducal Regulation of 17 December 2025 on travel and subsistence expenses and relocation allowances of State agents came into force on 1 January 2026 and repeals the regulation of 14 June 2015; its article 12 refers to a Règlement du Gouvernement en Conseil to set the allowance for travel by private means of transport, and that regulation is dated 23 January 2026, published in Mémorial A no. 22 of 2026.

We were unable to read the amount set by that regulation of 23 January 2026 in the published text. A 2026 call-for-projects funding guide issued by a Luxembourg ministry quotes EUR 0.30 per kilometre for domestic travel, referring to that regulation of 23 January 2026: we flag it as a consistent indication, not as a verified official amount, because that guide governs the eligibility of subsidised expenditure and not the remuneration of State agents. Verification is done against the text of 23 January 2026, and an internal policy that quantifies a mileage allowance should cite that text, not a scale taken from a neighbouring country.

On distances, finally, the 2015 regulation referred to the official distance map for domestic journeys, and the 2025 text adds that distances travelled at the place of the mission may be taken into account on supporting evidence in the claim. A statement that adds up kilometres with no itinerary satisfies neither.

Lump sum or actual expenses: the distinction that decides the tax

In Luxembourg a lump sum for travel expenses is taxable and a reimbursement against receipts is not, except where the lump-sum allowance falls within the exemption regime of article 115, no. 3 of the law on income tax, whose conditions and ceilings are set by the amended Grand Ducal Regulation of 3 December 1969 and detailed by circular L.I.R. no. 115/6.

The mechanism reads in two steps. Travel and subsistence expenses directly related to the activity carried on are business expenses within the meaning of article 105. Article 115, no. 3 then allows special allowances granted separately from normal remuneration by reason of those expenses to be exempted in whole or in part. The trade-off is explicit: expenses covered by such an allowance are excluded from any deduction under article 105. The exemption of the allowance and the deduction of the cost are not cumulative.

The ceilings and conditions of the circular of 13 July 2018, which replaces that of 7 May 2003, are set out in the table below. Three formal conditions matter there as much as the amounts, and they are the ones most often missing from files. Subsistence expense reimbursements appear separately in the employee's salary account. A monthly statement detailing each journey is drawn up as an annex to the salary account and kept available to the Administration des contributions directes. Finally, the exemption may never exceed the allowance actually paid.

The circular also reserves a specific regime for professional drivers and crew, built on separate day and night exemptions, with an obligation to keep available to the administration the supporting documents for meals taken in restaurants and for overnight stays. A transport company therefore does not apply the ordinary secondment regime, and that is a configuration error we come across.

What an employee can deduct when the employer reimburses nothing

A Luxembourg employee whose business expenses are not reimbursed deducts them as business expenses, but only for the part exceeding the automatic annual allowance of EUR 540, and provided they can split business use from private use.

The flat-rate allowance for business expenses is EUR 540 per year per employee, and withholding at source already takes it into account, as it does the flat-rate travel expense deduction entered on the card. Claiming actual expenditure is therefore worthwhile only if the total exceeds that threshold. The claim is made either in the tax return or by applying for an entry on the withholding card using form 164 R for residents and 164 NR for non-residents, together with the supporting documents and the original card.

For a personal vehicle, the apportionment rule is the one for mixed expenses. An expense used for the business activity to the extent of 90% or more is fully deductible; below that, it is split between a non-deductible private share and a share constituting business expenses. There is therefore no mileage scale on the employee's side that would dispense with that apportionment, and it is the limit we most often point out in support of a personal tax return.

The boundary with the company car remains distinct: there the subject is not the deduction of a cost but the valuation of a benefit, dealt with in our article on the company car benefit in kind.

What we regularly see on Luxembourg expense claims

On Luxembourg expense claims we regularly see three defects that turn a non-taxable reimbursement into a salary supplement: a round monthly allowance, a statement with no itinerary, and home-to-work kilometres slipped into a business mission claim.

The first defect is the costliest because it is systemic. A « travel allowance » line of an identical amount every month is a lump sum, whatever the reality of the travel it covers, and article 95, paragraph 2 takes it outside the exception. The reassessment then covers all months not time-barred, with tax and the contribution base to be rebuilt, and the manager discovers that good intentions correct nothing.

The second concerns the form of the supporting document. A statement showing a total number of kilometres with no date, no purpose of the journey and no itinerary cannot demonstrate the employer's exclusive interest, and it does not meet the monthly per-journey statement the circular requires. We find that rebuilding the record after the fact, two financial years later, takes several days of work for a fragile result, whereas an expense claim form kept as things happen, with date, purpose, route and kilometres, closes the question in a few minutes a month.

The third is a confusion of categories, and it often sits with the salaried manager of a small structure travelling « to the office » from home. Those kilometres fall under the article 105bis allowance and not under a mission. Booking them as travel expenses exposes the company on two fronts at once, salary tax and the contribution base. Putting this in order is decided with the authorised accountant who prepares the payslips, when the internal policy is framed and not on the occasion of an audit; it is the same reflex as the one described on our payroll page.

Sources and verification

Written for Financial Services Luxembourg and reviewed before publication by Mickaël LOC, authorised accountant (authorisation 10077274). The sources were verified on 9 November 2026, the publication date of this article.

The sources consulted are as follows. On the taxing principle, article 95, paragraph 2 of the amended law of 4 December 1967 on income tax, in the wording reproduced on the « Forfaits accordés aux salariés » page of the Administration des contributions directes, which places within taxable salaries all indemnities other than non-lump-sum reimbursements of expenses incurred in the exclusive interest of the employer, and which states that lump-sum allowances remain taxable and do not fall within the exemption of article 115, numbers 2 and 3.

On the home-to-work journey, article 105bis of the same law, the « Frais de déplacement forfaitaires, unités d'éloignement » page of the Administration des contributions directes and the « Déduire certaines dépenses en relation avec l'exercice d'une activité salariée » page of Guichet.lu. Those two pages give the deduction of EUR 99 per distance unit, the exclusion of the first four units since 2013 and the cap of 26 units, or EUR 2,574.

They also give the computation by analogy for non-residents, the EUR 540 flat-rate allowance for business expenses and forms 164 R and 164 NR. On the regime of allowances, circular L.I.R. no. 115/6 of 13 July 2018 from the director of taxes, which replaces that of 7 May 2003: its point 1.2 characterises the employer's contribution to journey costs as a salary supplement within the meaning of article 95 duplicating the article 105bis deduction, whether it is a lump sum or reimburses a ticket or a season pass, extends the same analysis to a company car made available for that journey by reference to article 104, paragraph 2, and excludes from the taxable benefit collective transport organised by the employer;

its developments on travel and subsistence expenses characterise those expenses as business expenses under article 105, recall the exemption of article 115, number 3 on the conditions of the amended Grand Ducal Regulation of 3 December 1969 and the corresponding exclusion from any deduction, and set the exemptible distance allowance at EUR 22.00 per calendar day, the night allowance at EUR 44.00 breakfast included for an overnight stay in a hotel or similar establishment, the application to all calendar days except paid leave, the cap at the allowance paid, the separate entry in the salary account and the monthly per-journey statement, together with a specific regime for drivers and crew.

On the mileage allowance, the circular of the director of taxes of 1 September 2015, which accepts the reimbursement of an employee using their private car for business travel according to the rates of the mileage allowance for official journeys, the Règlement du Gouvernement en Conseil of 19 June 2015 which set that allowance at 30 euro cents per kilometre, the Grand Ducal Regulation of 17 December 2025 on travel and subsistence expenses and relocation allowances of State agents, in force on 1 January 2026 and repealing that of 14 June 2015, and the Règlement du Gouvernement en Conseil of 23 January 2026 taken on its articles 12 and 17, published in Mémorial A no. 22 of 2026, all texts consulted on legilux.public.lu.

Four points could not be verified in this run, and we flag them rather than present them as established. First, the amount of the mileage allowance set by the Règlement du Gouvernement en Conseil of 23 January 2026: we did not read that amount in the published text, and the figure of EUR 0.30 per kilometre that we quote comes from a 2026 call-for-projects funding guide issued by a Luxembourg ministry, which refers to that regulation; the reader checks it against the text of 23 January 2026 in Mémorial A no. 22 of 2026 before quantifying an internal policy.

Second, the express exclusion of business expense reimbursements from the social security contribution base: the pages of the Centre commun de la sécurité sociale and articles 33 and 34 of the Social Security Code that we were able to read define the base by reference to basic remuneration and its complements and accessories without stating that exclusion, which remains to be confirmed against the consolidated text of the Code or by a written position of the Centre commun.

Third, the amounts of EUR 7.50 and EUR 15.00 appearing in the drivers' regime for an overnight stay in the cab, where the extraction of the document did not allow each amount to be tied to its column: they are to be read in circular L.I.R. no. 115/6 itself. Fourth, the numbering of the circular of 1 September 2015, which the administration's file reference gives as number 104/1 and which one listing shows as number 104/11.

Direct access to the texts on impotsdirects.public.lu and legilux.public.lu was blocked by the network in this run: the references above come from searches restricted to those official domains and not from reading the documents in full, which human review must check before publication. Nor have we verified whether the circular of 13 July 2018 has been amended since its publication.

This article sets out the state of the law at the publication date and is not personalised advice: a specific situation is assessed on documents. Report an error to contact@financialservices.lu: the correction is dated in the article.