Increasing gas prices leads to a change in rates for mileage tax deduction and allowance

Everyone with a car feels the rising gasoline prices every time the car needs to be refueled. For this reason, the Tax Council has extraordinarily decided to increase the rates for the mileage deduction and the mileage allowance. This decision affects the many thousands of users who use Acubiz every day to get reimbursed for business travel in their own vehicle. There is no need to worry – Acubiz will automatically update the rates for tax-free travel allowances as of May 1st.

TL;DRIn response to sharply rising fuel prices in 2022, the Danish Tax Council made an extraordinary mid-year adjustment to mileage rates, only the third such adjustment in 30 years. Acubiz updated its platform automatically on 1 May 2022 to apply the new rates, meaning users received correct reimbursements without any manual configuration.

The reason behind the changes in rates

The reason behind the change in rates is the increasing gas prices. This is quite uncommon as it is only the third time in 30 years that the rates have not been adjusted in the middle of the year.

Every year in November the Tax Council announces the rate for mileage tax deduction. They are based on an estimate of what it will cost to keep a car in the following year. The most important figure to look at is gas prices. This year gas prices have increased a lot more than originally anticipated back in November of 2021. Now, it is estimated that the average gas price will be DKK 15.77 per liter in 2022. This is why the Tax Council decided to adjust the rates in the middle of the year.

Below are tables that show the new rates for 2022.

Mileage tax deduction

Mileage allowance

We are seeing an increase of 18 Danish øre per km. for mileage tax deduction (if mileage is between 25 and 120 km) and an increase of 19 Danish øre per km. for the mileage allowance (if mileage is less than 20.000 km. per year).

The new rate for mileage tax deduction is valid for the whole year of 2022. However, the new rate for mileage allowance will be in effect from the 1st of May 2022.

The change in rates for mileage allowance does not take place retroactively because it is considered difficult to deal with the administrative implications this will cause.

What do these changes mean if you register mileage with Acubiz?

Companies using Acubiz smart company mileage tracking feature, do not have to worry about these changes. The rates for mileage allowance will be automatically updated in Acubiz from Sunday, May 1st.

Of course, Acubiz uses the date of the mileage to set the rate and not the date of registration. If an employee post-registers a trip from the month of March in May, the previous rate of DKK 3.51 per km. will be used and not the new rate of DKK 3.70 per km.

Read the Tax Council’s press release here

Frequently Asked Questions

What are the new Danish mileage tax deduction rates introduced in 2022?

The Tax Council raised the mileage deduction rate for distances between 25 and 120 km from DKK 1.98 to DKK 2.16 per km. For distances above 120 km, the rate increased from DKK 0.99 to DKK 1.08 per km. The new rates apply to the full 2022 calendar year.

What are the updated mileage allowance rates for 2022?

The tax-free mileage allowance for the first 20,000 km driven per year rose from DKK 3.51 to DKK 3.70 per km, an increase of 19 ore. For kilometers above 20,000, the rate went from DKK 1.98 to DKK 2.17 per km. The new allowance rate applies from 1 May 2022.

Why did the Tax Council change mileage rates mid-year in 2022?

The change was triggered by fuel price increases far beyond what was forecast when the rates were originally set in November 2021. The average petrol price in 2022 was estimated at DKK 15.77 per liter, which was significantly higher than the original projection. Mileage rates are based primarily on fuel costs, so the discrepancy justified an exceptional mid-year revision.

Do I need to manually update mileage rates in Acubiz when the Tax Council changes them?

No. Acubiz automatically updates tax-free travel allowance rates when the Tax Council announces changes. The 2022 mid-year rate adjustment was applied to the platform on 1 May 2022 without any action required from users or administrators.