Taxation of mileage reimbursements for commuting to the workplace

The Directorate General of Taxes (DGT) has clarified the tax treatment of amounts that companies pay to their employees to compensate for the use of their own vehicles for travel from their habitual residence to the workplace.

What the DGT has ruled

The inquiry focused on determining whether these amounts could qualify for the exemption provided for in Article 9.A.2 of the Personal Income Tax Regulations (RIRPF). The Administration's criteria establish that said exemption applies exclusively when the worker must travel away from their habitual workplace to perform their professional duties.

Consequently, travel made from a private residence to the workplace does not meet the requirement for the exemption. Therefore, amounts paid to compensate for employee commuting, as occurs in cases of workers residing in outlying villages, must be included in the taxable base as employment income.

What this means for you

This criterion has a direct impact on both company management and the tax situation of workers:

• For the worker: Mileage reimbursements received for traveling from home to work are not tax-free income; instead, they must be taxed in their income tax return.
• For the company: Entities making these payments are obliged to apply the corresponding IRPF withholding on such amounts.

What should be done

It is necessary to verify the nature of the travel being compensated in the payroll. If the payments strictly correspond to the home-to-workplace commute, they must be treated as employment income subject to taxation. It is recommended to assess each particular situation, especially when there are mixed trips that combine work travel away from the center with round trips from the residence.