Mileage allowance in the United Arab Emirates: everything you wanted to know

April 19, 2023 ndowd

Given that many employees frequently take business journeys using their own vehicles, it’s important for finance managers across the world to know the current mileage rates to ensure the members of their team are being fairly compensated for their expenses.

In this article, we’ll talk about mileage allowance rates and other travel allowances in the United Arab Emirates and give you all the info you need to pay mileage expenses to your employees in the country.

How does mileage allowance work?

When an employee uses their own car for business purposes, you need to reimburse them to cover the cost of fuel, insurance, and wear and tear; this is known as mileage allowance.

Road taxes (such as tolls) and parking fees are generally not part of standard mileage allowances. Usually they’re accounted for as separate car-related expenses, but in the UAE this might vary from employer to employer.

Mileage allowance payments are usually based on the number of miles or kilometers traveled. For this reason, you need to ask employees to keep a detailed record of the distances they drive, so that you can reimburse them swiftly.

Offering a mileage reimbursement is a way for employers to compensate their employees for using their own vehicles for work and avoid the need to provide company cars.

In some countries, tax authorities define the business mileage rates to which employees are entitled.

For the UK, the HMRC defines mileage rates for both company vehicles and personal cars when used for business-related activities, while in the US it’s the Internal Revenue Service (IRS). In both countries, there are per-mile flat rates that employees can claim. The exact amount might depend on the type of vehicle used.

This isn’t the case for the United Arab Emirates, though: there, it’s up to employers to define travel allowances and the way they’re calculated – and information on this should be included in workers’ employment contracts.

What are the mileage allowance rates in the United Arab Emirates for 2023?

The mileage allowance rates in the United Arab Emirates (UAE) may vary depending on the company and industry. There’s currently no fixed minimum mileage allowance rate and no official government source providing information about mileage allowances in the country. This means that each company can decide to reimburse employees for their business travel expenses, in case they’re using their personal vehicles.

And indeed, while there’s no legal obligation to pay out allowances for the business use of personal vehicles, most companies do it at their own discretion, as a part of their corporate travel policies.

According to personal accounts we found online (such as this one or this one), companies offer a standard mileage rate between 0.5 and 2 AED per kilometer to cover employees’ actual costs for using their cars for business purposes, such as the cost of fuel and their cars’ wear and tear.

Currently, fuel rates in the UAE are at 2.9 AED per liter, or 10.978 per gallon. The rising cost of fuel in the past year has led to a 38% increase in fuel reimbursement expenses for UAE companies in 2022, according to Bayzat, a local company offering automated HR and payroll solutions.

As in other countries in the world, in the UAE corporate travel is currently on the rise, as compared to 2020-2021 levels. Companies are still adapting a conservative approach for overseas business travel but recovery is now on the horizon.

The Middle East, which was the most impacted region in 2021 in terms of air travel, is currently on track for recovery, which, according to the Airports Council International, is expected to happen in 2024.

What are travel allowances in the United Arab Emirates?

In the UAE, travel allowances might actually be a part of an employee’s salary.

In fact, in the UAE, salaries commonly include different allowances, such as housing allowances and child education allowances. Typically, gross salaries in the country consist of:

50% to 60% basic pay
40% to 50% allowances, including travel allowances

So, in many cases, travel allowances are included in the gross salary and are paid monthly (except for when an employee is on annual leave); they might be a fixed percentage of the base salary or might also be calculated based on distances traveled.

In practice, travel allowances are usually meant to cover commuting costs or airfare for expatriates. However, in case workers are often expected to travel for business with their personal vehicles (f.e. to meet clients or to go to a different office), companies might offer higher monthly travel allowances or a specific mileage allowance based on the distances traveled.

So, travel allowances in the United Arab Emirates might mean different things and cover:

Business mileage costs for travel to meet clients, go to business events, or travel between offices
Commuting costs, i.e. transportation from and to the office
Airfare for expat employees (f.e. one flight per year to and from their home country)

Mileage allowances in the UAE may or may not include fees for parking and tolls such as Salik, Dubai’s electronic toll gate system, so it’s important for both employers and employees to discuss all the details in advance – and make sure they’re spelled out in the employment contract. Additionally, having a clear and well-defined travel expense process is essential for the easy management of reimbursement requests;

We didn’t find information on typical mileage allowance rates in the UAE per type of vehicle, so this is an important factor to consider when negotiating a contract.

Mileage allowance in the UAE: The key takeaways

Mileage allowance rates in the UAE are agreed between the company and the employee – there are no legal stipulations on mileage rates or mileage allowance reliefs. That’s why it’s essential for organizations to make sure the types of travel allowances are clearly spelled out in the employment contract.
If you’re responsible for managing your organization’s travel expenses, one of the most efficient ways to do this is to integrate your expense management partner with a corporate travel management solution such as TravelPerk. Keeping all expenses in a single location helps you stay on top of travel budgets, avoid errors and discrepancies, and provide a positive experience to your travelers.