Denmark increases mileage rates in light of rising fuel prices

People who drive for work are affected by global fuel prices that have been on the rise in the past few months. While many countries offer a tax deduction for work-related driving, it seems almost none of them are ready to alleviate the rising costs for day-to-day drivers. 

First mover

However, one country is already on it. Denmark has officially announced higher mileage deduction rates for both work-related driving and commuting and has applied them retroactively from the beginning of 2022 for the latter. The extraordinary rates change during the applicable year comes specifically due to the rising fuel prices in the first quarter of 2022.

Every year, the Danish authorities determine the upcoming year’s mileage rates in November based on estimations of the upcoming year’s costs for owning and operating a vehicle. A rate change during the year is an uncommon step for the Scandinavian country, having taken place only twice before in the last 30 years.

As one of few countries to provide deductions for commuting to and from work, Denmark is raising these rates too. The commuting deduction rate is now increased from 1.98 to 2.16 DKK retroactively from January 1st, 2022.

The mileage deduction rate for business-related driving is increased from 3.51 to 3.70 DKK per kilometre from the 1st of May 2022. Companies are able to raise the rate at which they reimburse employees for work-related trips to the new rate, and if not reimbursed, employees are able to claim deductions for any work-related kilometres after May 1st by the new rate.

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Others are demanding an increase in mileage deduction rates

A trade union in Sweden is pushing the government to increase the rate per kilometre in the country due to the sharply rising fuel prices. Sweden has not updated their mileage rate since 2007, making it one of the few countries that have not taken into consideration the rising operational costs of owning a vehicle in over a decade. Furthermore, the country is considering lowering taxes on diesel from June to October 2022, in order to further help residents.

The United Kingdom is also trying to have its mileage allowance rate raised by an official petition to reach the government, should enough signatures be collected. The UK has not updated their mileage allowance rate since 2011, keeping it at 45 pence per mile for the first 10,000 miles, and 25 pence after that.

Unfortunately, the petition is not on course to gather the required signatures. It will need 10,000 signatures for the government to respond to it, and 100,000 signatures for the petition to be considered for a debate in Parliament. As of this writing, the collected signatures are 2014.

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Will others follow suit?

While Australia, Canada and the USA increased their mileage rates for the 2022 tax year, the current fuel price increase was not a consideration, as these updated rates were set at the end of 2021.

Australia is raising its rate by 3 AUD cents for the 2022/2023 tax year, Canada – by 2 CAD cents for the 2022 tax year and the US by 2.5 USD cents for 2022. While Australia's fuel prices are going back to January 2022 levels, this is not the case in Canada and the US.

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The US has twice updated the set mileage rates due to high fuel prices during the year - in 2008 and 2011. Back in 2008, the IRS raised the rate for business mileage by 8 cents from July 1st, and in 2011 - by 4.5 cents again from July. Currently, there is no indication of upcoming changes for the 2022 tax year.

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The rest of the mentioned countries have also seen a steep rise in fuel prices, but as of now, there is no talk of further increasing the 2022 mileage deduction rates.

The situation is very much the same in the EU, with most states not looking to increase their deduction rates for business mileage as fuel prices soar.