Tax-free travel allowance increases, motor vehicle tax reduced

The government is introducing measures to support companies and citizens with the economic consequences of unrest in the Middle East. In total, €627 million is allocated for spending measures and €340 million for targeted tax relief in 2026. The country has also been escalated to phase 1 of the National Oil Crisis Plan. Because energy prices are expected to remain high for the time being, even if the conflict eases quickly, the government considers intervention necessary.

Increase in travel allowance
To strengthen purchasing power, the government is structurally increasing the maximum tax-free travel allowance from €0.23 to €0.25 per kilometre, retroactively for the whole of 2026. Employers are encouraged to make use of this tax benefit so that employees actually receive the advantage. The government intends to discuss this with social partners. The Tax Administration needs three months of preparation time; the approved policy decision will later be included in a legislative proposal.

Consequences for employers
The proposed increase in the tax-free mileage allowance may seem beneficial at first glance, but according to employers’ organisation AWVN it also has clear drawbacks. The additional costs are fully borne by employers, leaving less financial room for salary increases and other employment conditions. In practice, the measure only means that no tax is levied on the extra two cents; employers must still pay the full amount. AWVN therefore advocates a broader approach to mobility, with alternatives such as more working from home and encouraging public transport or electric driving.