Mileage allowances and car reimbursement rates in Cyprus (2026)

01 Aug 2024 · 5 MIN READ

Updated: April 2026

Cyprus! From business hubs like Limassol and Nicosia to the balmy South, you can drive across the country in just a few hours and take in views from the coast to the mountains. For those driving for work-related reasons, we’ve got some good news. Employees using their own car for business trips can claim a tax-free reimbursement from their employer to cover travel expenses.In this article, we run through everything you need to know about mileage reimbursement in Cyprus, helping you dot your i’s and cross your t’s at the end of the tax year.Ready? Let’s get going.

How does mileage allowance work in Cyprus?

Most European countries have a system where employers can reimburse employees for using their own cars to make business trips. Based on a flat rate, they can send a lump sum back to the employee to cover any costs incurred during the trip—for example fuel, tolls, or general wear and tear of the vehicle.In Cyprus, there are two vehicle-related benefits in kind:

Cash allowances paid to employees or officers in respect of the use of their own cars, for business duties
A company car is made available to employees for private use

What is not included in the Cyprus mileage allowance?

In order to qualify for a subsidy car reimbursement while using a private car for business purposes, journeys must be strictly related to the employee’s role as stated in their labour contract. This means no personal journeys, and no trips loosely related to their company (e.g. a coffee run).Bonus tip! In Cyprus, all employers must keep specific records for all owned, hired or leased cars, regardless of whether they are available for private use to their employees. This record must be kept up-to-date and available to the Tax Department upon request.

Putting together your company’s travel policies? Stay compliant using our guide to writing a car allowance policy .

What are the mileage allowance rates in Cyprus in 2026?

According to the Cyprus Tax Department (the equivalent of HMRC), the business mileage rate in Cyprus for 2026 is €0.25 per kilometre driven.There are certain conditions which have to be met in order for the travel allowance reimbursement to remain tax-free:

The payment rate for each kilometre does not exceed government guidelines (any excess amount will be considered taxable income)
The reimbursable travel is to be recorded in a logbook which is readily available for verification by the Tax Department
Payments cover only the business element (i.e. no personal trips)
The logbook is kept by the employer for at least six years

Multiple car cash allowances

If an employee receives more than one cash car allowance either from the same employer or from separate employers, the deduction of 50% (with a maximum of €1,500) can only be used once. In other words, it can only be applied to one cash allowance, not the total amount.It is the employee’s responsibility to inform the employer that they have already benefited from the deduction relating to the cash allowance for the car use and no further deductions should be claimed.Here is an example:

One employee has two, separate allowances each month:
- Allowance 1: €3,000 from Employer A
- Allowance 2: €2,000 from Employer B
Applying the deduction:
- The employee can choose to apply the 50% deduction or the €1,500 maximum to only one of these allowances
- If applied to Allowance 1 (€3,000), the fringe benefit would be €1,500 (€3,000 - €1,500)
- If applied to Allowance 2 (€2,000), the fringe benefit would be €500 (€2,000 - €1,500)
Informing employers:
- If starting with Employer B, the employee must inform Employer B about the car cash allowance from Employer A. This ensures that both employers understand the single deduction limit and apply it correctly.

Employees, listen up! If you’re already receiving a vehicle cash allowance and you start receiving a new one from a different employer, it’s up to you to let the new employer know about the existing allowance. Staying transparent is key to keeping compliant—and remember, it doesn’t matter how many allowances you receive, the reduction benefit (50% or up to €1,500) can only be used once.

Check out our guide to setting up your company’s mileage reimbursement policy here.

Per diems in Cyprus for 2026

What is a per diem? Put simply, a per diem allowance is a sum of money that an employee can claim (tax-free) from their employer to cover living expenses and travel costs while completing an overnight work journey. It usually includes meal allowances, accommodation costs and other necessary expenses.The current per diem rate for employees on work trips in Cyprus, as laid out by the European Union , is €208 per day.In Cyprus, business travel includes trips taken for marketing purposes, business transactions, participation in business seminars, temporary placement of an employee outside the Republic and other similar purposes. Participation in educational programmes abroad is generally not included.As with mileage reimbursement rates, these travel allowances are usually handled in-house.

Streamline corporate travel with Perk's business travel management platform

Now you’re familiar with the mileage reimbursement system in Cyprus, it’s time to plan your journeys. One of the best ways to manage corporate travel is by using a dedicated business travel management platform—like Perk—to keep a tight grip on both employee movements and company costs.Choosing from the vast selection of third-party integrations offered by Perk, including firm favourites like Ramp and Spendesk You can rest easy knowing your company travel is under control, and all in one place. Now you’re ready to explore Cyprus!