Per diem (Latin for "per day" or "for each day") or daily allowance is a specific amount of money that an organization gives an individual, typically an employee, per day to cover living expenses when travelling on the employer's business.
A per diem payment can cover part or all of the expenses incurred. For example, it may include an accommodation allowance or it may only cover meals (with actual accommodation costs reimbursed separately or be prepaid). Travel, particularly by motor vehicles, is often reimbursed at a rate determined only by distance travelled, e.g., the US business mileage reimbursement rate.
Fixed per diem (and per mile) rates eliminate the need for employees to prepare, and employers to scrutinise, a detailed expense report with supporting receipts to document amounts spent while travelling on business. Instead, employers pay employees a standard daily rate without regard to actual expenditure. In some countries, the income tax code specifies a maximum daily allowance: although an employer may pay a higher rate, the excess is subject to income tax.
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Accommodation and subsistence (meals) payments paid as fixed daily amounts are described as "scale rate expenses payments" by HM Revenue & Customs (HMRC). HMRC guidance does not use the term "per diem",but it is used by some organisations. HMRC allows scale rate expenses payments for income tax purposes for travel within the UK, and allows a dispensation for such payments for travel abroad.
U.S. companies and organizations use the per diem rate guide published by the General Services Administration which provides rates for a number of cities in the Continental United States. [ citation needed ] For all foreign locations, per Diem rates are established by the Department of State.For locations in the US outside the continental US, including Alaska, Hawaii and the US territories and possessions, per Diem rates are published by the Per Diem, Travel and Transportation Allowance Committee (also known as the Per Diem Committee or PDTATAC).
Per diem is understood to include the additional expenses incurred living away from home—basically the need to have two residences.The GSA establishes per diem rates within the Continental United States for hotels "based upon contractor-provided average daily rate (ADR) data of fire-safe properties in the local lodging industry"; this means that per diem varies depending on the location of the hotel—for instance, New York City has a higher rate than Gadsden, Alabama.
To qualify for a per diem, work-related business activity generally requires an overnight stay. The IRS code does not specify a number of miles. However, based on case precedent and IRS rulings, it is commonly accepted that an overnight stay must genuinely be required and actually occurs, to justify payment of per diem allowance.The purpose of the per diem payment (or the deduction of expenses when inadequate reimbursements are provided) is to alleviate the burden on taxpayers whose business or employment travel creates duplicated expenses.
The US military pays its members per diem in accordance with the Joint Travel Regulations. [ citation needed ]According to these regulations, the first and last days of travel are paid 75% of the daily General Services Administration, PDTATAC, or DOS rate, while all other days of travel receive the full rate. The JTR also states that lodging taxes for CONUS and non foreign OCONUS are a reimbursable expense but requires a receipt. The JTR also follows the 'expenses below $75 do not require a receipt' rule, established by the Internal Revenue Service although local disbursing officers may question charges they feel may be false.
The US Government also allows federal employees to purchase a home at the temporary duty location and claim the allowable expenses of: mortgage interest, property taxes and utility costs actually incurred.
In addition, truck drivers have a special way of calculating a tax deduction for per diem. All drivers who are subject to USDOT hours of service are eligible. As of October 1, 2009, the per diem rate is $59 per day, and they may deduct 80% of this amount from their taxable income..
Due to the large number of away games and associated travel days in American sports, per diem rates are often major components in collective bargaining agreements between leagues and their players' unions. As of 2016, the NBA has the highest per-diem for players at $115 per day, followed by the NHL whose per-diem began at a base of $100/day in 2012–13 and is adjusted each year based on changes in the US Consumer Price Index. Minor pro and collegiate athletes also receive meal money for overnight trips, usually paid as a rate set by the league or university they are affiliated with. As athlete salaries have risen, per diems have occasionally become a contentious issue when negotiating CBAs: for instance, in 2016 Major League Baseball slashed allowances from $100/day to $35/day, citing high salaries and teams now providing pre- and post-game food to players on the road as their rationale.
For American railroads, per diem is a charge railroads levy when their freight cars are on other railroad's property, to assure prompt return.
Per diem clauses may be used in contracts to specify penalty accruals. Such wording would be found in reference to the expected closing date for a real estate contract, typically compensating a seller for a buyer's lack of expedience.[ citation needed ].
Per diem in Russia is normally set up by companies but in accordance with the legislation cannot be lower than 700 RUR for travel in Russia and 2500 RUR for travel outside of Russia. If employees pay for a hotel in cash or with a payment card, then they must keep the cash register receipt (kassovy check). The regulations governing the use of cash register by business entities allow certain taxpayers to produce handwritten receipts (kvitantsia) at a point of sale instead of printed cash register receipts. Handwritten receipts (kvitansia) usually contain the same information as cash register receipts and are treated as sufficient evidence of expense.
Generally a per diem allowance covers:
Russian tax regulations do not provide for any alternative to per diem method for reimbursing employee’s meal cost and incidental expenses. Meal costs and other incidental expenses cannot be treated as deductible expenses because they are already covered by per diem allowances.
Meals may be treated as deductible expenses only if they qualify as hospitality expenses. Companies are free to set their own per diem rates or maximum allowances that employees are reimbursed for expenses incurred while on business trip.
The portion of per diem allowance in excess of RUB 700 for travel in Russia and RUB 2,500 for travel outside Russia is deemed employee’s taxable income. The excess is treated as part of employee’s taxable gross income and must be withheld from his/her earnings.
In Germany, per diem allowance are calculated in accordance with the provisions of the German Income Tax ActThe Act sets out the per diem amounts that must be paid based on the location the temporary location a worker is visiting and the duration of stay. The rates are reviewed and normally increased on an annual basis. Reimbursement of travel expenses must be claimed within six months of travel (beginning with the first day following completion of your journey). Travel expenses cannot be claimed after this period.
There are different rules for travel within the country and international trips. For domestic business trips spanning more than one day, employees receive €28 (was €24 until 31/12/2019) for every 24 hours that they are away from their home and primary workplace and € 14 (was €12 until 31/12/2019) for the day of departure and arrival, if the employee does not spend the night at their home. For single-day trips employees receive €14 (was €12 until 31/12/2019) for the calendar day if the employee spends at least 8 hours away from their home or primary workplace. If the trip is outside of Germany the amount varies by country (and in some cases city).
Section 5(2)(a) of the Kenya Income Tax Act imposes tax on subsistence, travelling, entertainment or other allowances received by an employee in respect of employment or services rendered. However, where the Commissioner is satisfied that the amounts so received “solely represent reimbursement” to the employee, the same shall not be chargeable to tax.
“Per diem” refers to payments in respect of subsistence, travelling, entertainment and other allowances made by an employer to his employee while the employee is on official duties outside his usual station of work.
Where per diem solely represents reimbursement, a person shall furnish supporting evidence to the Commissioner, provided that where the amount does not exceed two thousand shillings per day, no such supporting evidence shall be required.
However, the organisation can seek the Commissioner’s opinion regarding the admissibility of any per diem scales (or any other rates) prior to or after payment, in which case, the per diem amount shall not be taxable on the employee.
The opinion shall be accompanied with factors that influence the per diem rate and justification for the rates used including: the cost of living in different geographical zones or localities within the country and overseas travel, where applicable.
A Daily Subsistence Allowance (DSA) comprises the UNDP's total contribution towards such charges as lodging, meals, gratuities, transport cost from place of lodging to the first place of official business, and vice versa, and other payments made for personal services rendered.
A DSA is applicable for UNDP staff members on authorized official travel and for non-staff members when their travel is organized and paid by UNDP. For non-staff members it is on the basis of the standards established for staff members, except where otherwise expressly provided in the terms of their contract.
Tax deduction is a reduction of income that is able to be taxed and is commonly a result of expenses, particularly those incurred to produce additional income. Tax deductions are a form of tax incentives, along with exemptions and credits. The difference between deductions, exemptions and credits is that deductions and exemptions both reduce taxable income, while credits reduce tax.
National Insurance (NI) is a fundamental component of the welfare state in the United Kingdom. It acts as a form of social security, since payment of NI contributions establishes entitlement to certain state benefits for workers and their families.
A pay-as-you-earn tax (PAYE), or pay-as-you-go (PAYG) in Australia and the United States, is a withholding tax on income payments to employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed tax as determined on tax returns. PAYE may include withholding the employee portion of insurance contributions or similar social benefit taxes. In most countries, they are determined by employers but subject to government review. PAYE is deducted from each paycheck by the employer and must be remitted promptly to the government. Most countries refer to income tax withholding by other terms, including pay-as-you-go tax.
A company's payroll is the list of employees of that company that are entitled to receive pay and the amounts that each should receive. Along with the amounts that each employee should receive for time worked or tasks performed, payroll can also refer to a company's records of payments that were previously made to employees, including salaries and wages, bonuses, and withheld taxes, or the company's department that calculates and pays out these amounts. One way that payroll can be handled is in-house. This means that a company handles all aspects of the payroll process on its own, including timesheets, calculating wages, producing pay checks, sending the ACH, or Automated Clearing House, for any direct deposits, and remitting any tax payments necessary. Payroll can also be outsourced to a full-service payroll processing company. When a company chooses to outsource their payroll, timesheets, wage calculations, creating pay checks, direct deposits, and tax payments can be handled all, or in part, by the payroll company.
A flexible spending account (FSA), also known as a flexible spending arrangement, is one of a number of tax-advantaged financial accounts, resulting in payroll tax savings. Before the Patient Protection and Affordable Care Act, one significant disadvantage to using an FSA was that funds not used by the end of the plan year were forfeited to the employer, known as the "use it or lose it" rule. Under the terms of the Affordable Care Act, a plan may permit an employee to carry over up to $500 into the following year without losing the funds.
Employee benefits and benefits in kind include various types of non-wage compensation provided to employees in addition to their normal wages or salaries. Instances where an employee exchanges (cash) wages for some other form of benefit is generally referred to as a "salary packaging" or "salary exchange" arrangement. In most countries, most kinds of employee benefits are taxable to at least some degree. Examples of these benefits include: housing furnished or not, with or without free utilities; group insurance ; disability income protection; retirement benefits; daycare; tuition reimbursement; sick leave; vacation ; social security; profit sharing; employer student loan contributions; conveyancing; domestic help (servants); and other specialized benefits.
Form P11D is a tax form filed by United Kingdom employers for each director and for each employee and sent to the tax office with which their PAYE scheme is registered. P11Ds are used to report benefits provided and expense payments made to employees by employers that are not put through the payroll. The employees are also given a copy, should they need it for a self-assessment tax return.
Compensation of employees (CE) is a statistical term used in national accounts, balance of payments statistics and sometimes in corporate accounts as well. It refers basically to the total gross (pre-tax) wages paid by employers to employees for work done in an accounting period, such as a quarter or a year.
Health Reimbursement Account is an incorrect, but commonly used name for a Health Reimbursement Arrangement (HRA), a type of US employer-funded health benefit plan that reimburses employees for out-of-pocket medical expenses and, in limited cases, to pay for health insurance plan premiums.
Reimbursement is the act of compensating someone for an out-of-pocket expense by giving them an amount of money equal to what was spent.
Travel and subsistence expenses describe the cost of spending on business travel, meals, hotels, sundry items such as laundry and similar ad hoc expenditures. These reimbursements often have tax and related implications, and vary depending on the country of the business.
The business mileage reimbursement rate is an optional standard mileage rate used in the United States for purposes of computing the allowable business deduction, for Federal income tax purposes under the Internal Revenue Code, at 26 U.S.C. § 162, for the business use of a vehicle. Under the law, the taxpayer for each year is generally entitled to deduct either the actual expense amount, or an amount computed using the standard mileage rate, whichever is greater.
Foreign Service Specialists are direct-hire career employees of the United States Department of State and other foreign affairs agencies. They are members of the United States Foreign Service who provide important technical, support or administrative services in 19 career categories, including Diplomatic Security Agents, Doctors and Physician Assistants, Information Management Specialists, Office Management Specialists, Human Resource Specialists. They serve in over 290 Embassies or Consulates abroad, Washington, D.C. or other locations in the continental United States.
Temporary duty travel (TDY), also known as "temporary additional duty" (TAD) in the Navy and Marine Corps or TDI for "temporary duty under instruction” refers to a United States Armed Forces Service member's or Department of Defense civilian employee's travel or other assignment at a location other than the traveler's permanent duty station as authorized by the Joint Travel Regulations. This type of secondment is usually of relatively short duration, typically from two days to 189 days in length. Not all agencies use this designation.
An umbrella company is a company that employs agency contractors who work on temporary contract assignments, usually through a recruitment agency in the United Kingdom. Recruitment agencies prefer to issue contracts to a limited company as the agency liability would be reduced. It issues invoices to the recruitment agency and, when payment of the invoice is made, will typically pay the contractor through PAYE with the added benefit of offsetting some of the income through claiming expenses such as travel, meals, and accommodation.
An expense account is the right to reimbursement of money spent by employees for work-related purposes. Some common expense accounts are: Cost of sales, utilities expense, discount allowed, cleaning expense, depreciation expense, delivery expense, income tax expense, insurance expense, interest expense, advertising expense, promotion expense, repairs expense, maintenance expense, rent expense, salaries and wages expense, transportation expense, supplies expense and refreshment expense.
Commissioner v. Kowalski, 434 U.S. 77 (1977), is a decision of the United States Supreme Court relating to taxation of meals furnished by an employer. In this case, the Court interpreted Internal Revenue Code §119(a)-(b)(4) and (d) and Treas. Reg. §1.119-1.
Internal Revenue Code Section 132(a) provides eight types of fringe benefits that are excluded from gross income. These include fringe benefits which qualify as a (1) no-additional-cost service, (2) qualified employee discount, (3) working condition fringe, (4) de minimis fringe, (5) qualified transportation fringe, (6) qualified moving expense reimbursement, (7) qualified retirement planning services, or (8) qualified military base realignment and closure fringe.
An employer in the United States may provide transportation benefits to their employees that are tax free up to a certain limit. Under the U.S. Internal Revenue Code section 132(a), the qualified transportation benefits are one of the eight types of statutory employee benefits that are excluded from gross income in calculating federal income tax. The qualified transportation benefits are transit passes, vanpooling, bicycling, and parking associated with these things.
The Community Amateur Sports Club (CASC) scheme was introduced in 2002 by the then Labour government to support grass roots sport. The original legislation was drafted by Andrew Phillips. It recognises the importance of sport in the community by allowing local amateur sports clubs to register with HM Revenue and Customs (HMRC) as a sports club rather than a business for rates and tax purposes. As such, clubs can benefit from a range of tax reliefs, including Gift Aid and rate relief. Both property and non-property owning clubs can significantly benefit from the scheme.