Light entrepreneurs expense reimbursements

Expense reimbursement covers costs that are directly caused by work. Expense reimbursements are not considered salary, so taxes or payroll-related fees do not need to be paid on them.

It is accepted in tax practices that an invoicing service company can also pay travel expense reimbursements tax-free based on a travel claim, if the invoicing service company and the person performing the work have agreed that the work-related payment will be made as salary.

Travel expenses include:

• Kilometer reimbursements
• Per diems
• Meal allowances

Tax Administration's decision on tax-free travel expense reimbursements in 2025

Invoicing service companies offer freelancers the possibility to invoice their clients without setting up their own company. However, handling travel expense reimbursements in these situations can raise questions, particularly from a taxation perspective. Here is a summarized overview of the Finnish Tax Administration's latest guidelines on travel expense reimbursements in advance withholding, updated based on KVL 18/2024.

Conditions for Tax-Free Reimbursements

An invoicing service company can pay tax-free travel expense reimbursements to a freelancer when the following conditions are met:

• The compensation for work is agreed to be paid as salary
• The travel expense reimbursement is based on a travel claim
• The reimbursement adheres to the annual time and mileage limits confirmed by the Tax Administration

If these conditions are not met, the reimbursements are considered salary and are taxable.

Travel Claim

A travel claim must include:

• The purpose of the trip
• The destination
• The travel route
• The mode of transportation
• The start and end times of the trip

Travel claim details can be easily added to our system during invoice creation. Only mileage can be submitted for reimbursement, not any other car-related expenses, such as windshield washer fluid.

Links to tax administration guidelines

Tax administration's guidelines on tax-free expense reimbursements (12.11.2024)

Specialized fields include, for example, construction, earthworks, and forestry. In these fields, work sites often change, and employees typically work at each site for a short period.

per diem

According to tax authority guidelines, an employer can pay a tax-free per diem to a worker in a specialized field only when the employee stays overnight during a business trip. The employer may pay the per diem tax-free if all of the following conditions are met:

• The employee is a worker in a specialized field
• The employee has stayed overnight during the business trip in accommodation they rented or provided by the employer, and the stay in the same accommodation or nearby does not exceed the time limits specified in TVL Section 72 a
• The employee has a primary residence (home) elsewhere
• The time and distance requirements set by the Tax administration's decision on expenses are met.
• The work assignment has not been interrupted due to vacation or weekends (per diem cannot be paid for the period when the assignment is interrupted).

Meal Allowances

A meal allowance received from the employer for a business trip is tax-free income. The tax-free status of the meal allowance does not have the same duration or distance requirements as the per diem. For specialized fields, the tax-free status of the meal allowance requires that the employee does not have access to employer-provided workplace dining at or near the special work location (TVL Section 71, Paragraph 2).

The employer cannot pay a meal allowance to the employee in addition to the per diems.

Links to tax administration guidelines

Travel expenses for workers in specialized fields (1.1.2025)

Mileage reimbursement for a business trip is a tax-free allowance if it is based on the worker's actual travel expenses and complies with the annual maximum limits set by the Tax Administration. The tax-free status requires that the mileage reimbursement relates to travel to a special work location and is properly documented with a travel claim.

In specialized fields, such as construction, the tax-free status of mileage reimbursement requires that the trips are not between the worker’s regular workplace and home. The trips must be related to mobile work or tasks directed to a special work location. The time and mileage limits outlined in the Tax Administration's decision on expenses are crucial in determining the tax-free status of the reimbursement.

Mileage reimbursements cannot be paid tax-free if a travel claim is not submitted, or if the invoicing service company cannot verify the authenticity of the trips and the basis for the reimbursement. In such cases, the reimbursement is treated as salary.

A Per diem is a tax-free reimbursement to the worker for increased living expenses incurred during a business trip. The tax-free status requires that the business trip is outside the worker's primary workplace and meets the time and distance requirements defined in the Tax Administration’s decision on expenses.

The tax-free status of a per diem requires the business trip to last over 6 hours (partial daily allowance) or 10 hours (full per diem). Additionally, the trip must be at least 15 kilometers away from the worker's primary workplace or home. The travel claim must include the start and end times of the trip and the trip's destination.

A per diem cannot be paid tax-free if the duration or distance of the trip does not meet the requirements set by the Tax Administration. In such cases, the per diem is treated as salary and reported to the income register alongside other salary payments. In specialized fields, such as forestry and construction, the tax-free status of per diems is determined partly by different criteria.

If it is not possible to eat at a regular dining location and a per diem is not granted for the same days, meals eaten during working hours may contribute to meal expenses. The maximum amount for a meal allowance is €13.25 (in 2025).

Payment of a meal allowance requires that no per diem is paid for the business trip and that the individual cannot, due to work, have their meal break at their usual dining location. Receipts for meals and proof of the need for the allowance (e.g., mobile work) must be personally retained for future reference.

Purchases that may involve private use or have long-term utility are not accepted as reimbursable expenses. For example, clothing, a phone, or a computer cannot be claimed as reimbursable expenses by a light entrepreneur. However, these can be deducted as income-related expenses in personal taxation.

Meal and mileage reimbursements are always compensated based on their tax value and must be supported by a travel claim.

Many expenses that cannot be deducted through an invoicing service are deductible in personal taxation.

Links to tax administration guidelines

Meal and mileage reimbursements are always compensated based on their tax value and must be supported by a travel claim.

Calculating taxable income in personal taxation