Service agreement & reimbursement of travel expenses

The service agreement is an important part of a light entrepreneur’s everyday life. It’s importance is emphasised even more if the light entrepreneur hopes to receive tax-free travel expenses paid through the invoicing service. In this article, you will learn what a service agreement is and what should be recorded in it; how you can create one using FREE.fi’s platform, and finally we will learn how you can receive tax-free travel expenses when using our invoicing service.

Service agreement

A service agreement is a legally binding document that defines the conditions under which the service provider (i.e. a light entrepreneur) undertakes to provide services to the customer. This agreement usually includes details such as the scope of services, payment terms, duration of the agreement, responsibilities of both parties, and other relevant terms or conditions related to the provision of the service. At least the following articles should be added to the service agreement so that it is legally valid:

Content of the service: One of the most typical disputes arises over how comprehensive the service has been agreed upon with the customer and service provider. Be sure that when creating the service agreement; the focus is on the content of the service and what it includes and what it might not include.
Fee and payment terms: The fee for the service provider’s job, due dates, payment methods and, for example, late payment interest should usually be written into the contract.
Timetable and validity of the contract: In the service agreement, you should write down when the work must be completed and what the penalties are for any delay.
Responsibilities and obligations of the parties: The conditions regarding the responsibilities and obligations of the parties clarify the overall picture or certain special situations (e.g. negligence, force majeure, processing of personal data).

The service agreement is your security in case of conflicts with the customer. Although an oral agreement is basically as valid as a written agreement, we always recommend that you make a written agreement in order to avoid possible conflicting situations. FREE.fi also needs a written service agreement to handle debt collection on your behalf if necessary.

You can make a service contract easily in our application by following the instructions below the link.

Travel reimbursement: Reimbursements for travel expenses paid by the invoicing service

In this chapter, we explain how invoicing services can handle reimbursements for travel expenses and how these reimbursements affect your taxation. We discuss the duties and responsibilities of invoicing services and the tax treatment of travel expenses in different situations. In addition, we walk you through the distinction between tax-free and taxable expenses and find out the meaning of the travel expenses statement and the payer’s obligation to clarify it. This paragraph is compiled from the instructions of the Vero.fi website (in Finnish).

Please note that the Tax Administration instructions change from time to time. The information in this document is therefore not necessarily always up to date. Check the up-to-date instructions directly from the Tax Administration.

Tax-free or taxable travel expenses

The tax treatment of reimbursements for travel expenses varies and they can be either tax-free or taxable depending on the contract and payment method. It is therefore important that the invoicing services document the agreed reimbursements of travel expenses accurately, so that you are not charged with e.g. residual tax. This is why we at FREE.fi have wanted the creation of a service agreement as easy and effortless as possible for you. Read more about how you can create a service agreement through our service.

It is therefore good to note that if travel expenses are considered tax-free by us, they must meet all the criteria below. If the travel costs have not been agreed in advance in the commission-/service agreement according to the instructions of the tax authority, or if the receipts/logs for the trips are missing, the invoicing service must report these as taxable wages for advance collection.

Some rules and regulations

The invoicing service company and the person performing the work have agreed on the payment of the performance related to the work as a salary.
- As a FREE.fi light entrepreneur (performing the work) the money paid for the performance of the work is always handled as a salary.
When agreeing on the assignment, the person performing the work and the customer have agreed on what compensation for travel expenses will be paid and whether compensation for travel expenses will be paid in addition to the agreed invoice/fee or as part of the overall invoice/fee agreement.
- Make sure that the service agreement states how travel costs will be reimbursed to you and, if necessary, agree with your customer on the reimbursement of expenses in addition to the fee paid for the work or as part of the total fee.
The invoicing service company knows and is able to verify what the person performing the work and his customer have agreed on regarding the reimbursement of travel costs.
- Therefore, according to the instructions, we ask everyone who wishes to be reimbursed for travel expenses to add a service agreement to our application. Our customer service checks and approves or rejects each contract separately and ensures that the reimbursements of travel expenses meet the conditions stated in the cost decision of the Tax Administration, so that, based on the Income Tax Act, tax-free reimbursements of travel expenses can generally be paid to the person performing the work.
Reimbursement of travel expenses is based on the travel invoice submitted by the person performing the work to the invoicing service company in accordance with Section 17 of the EPA, whose accuracy is checked by the invoicing service company.
- In addition to the service agreement, we ask each person performing the work to attach vouchers for work trips, e.g. driving log and expense receipts to our application so that we can verify your request.

“In addition to the service agreement, a travel invoice must be presented, which shows the purpose of the trip, the destination, if necessary, the route, the method of travel, the start and end times of the trip, before the reimbursement of travel costs is paid” – Vero.fi

In summary, we can state that the invoicing service cannot pay the person performing the work compensation for travel expenses at all, if the person performing the work and the customer have not agreed on compensation for travel expenses. Make sure you add the service agreement and the necessary documents so that we can reimburse you for tax-free travel expenses when requested.

Please also note that if you receive tax-free travel expenses through the invoicing service, you cannot deduct the same expenses in your personal taxation – the same also applies to receipts, such as travel tickets.

Meal allowance

Before the reform of the tax law, the invoicing service was able to pay meal allowances to each worker according to the contract. The law has been amended in such a way that only practitioners in special fields (construction, civil engineering and forestry) can be paid a meal allowance as long as the criterias are met.

The person using the invoicing service is not in an employment relationship with the invoicing service, and thus there is no official meal break according to the Working Time Act. Consequently, the invoicing service cannot pay meal compensation to those performing the work tax-free, even if the payment of the meal compensation has been agreed between the customer and the person performing the work.

Service agreement & reimbursement of travel expenses