Per diem allowances for business travel
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International per diem rates
Domestic corporate travel is often cheaper than international business travel, so international travel involves different per diem rates. Per diem rates depend on the standard or previous cost of traveling to an area, plus the standard expenditure once there.The relevant governing body, such as HMRC or GSA, determines both domestic and international rates. These are based on standard travel expenses associated with business trips to certain parts of the globe.Rates vary depending on where you’re coming from and where you’re going. From Alaska to Hawaii, New York City to London, there are unique international per diem rates for every location.We’ve covered
domestic per diem rates
in depth—now we’ll turn our focus to international per diem rates. Here’s our comprehensive list of international per diem rates from both HMRC and the GSA.HMRC per diem rates for international corporate travel
Homeland Revenue & Customs regulate and modulate the allowable per diem rates in the UK—both domestic and international. They do so by determining the standard cost of lodging, meals, and any incidental expenses that could occur when traveling on business to a specific country.When traveling internationally, the option to apply for a bespoke per diem allowance is still available. These payments should be agreed with HMRC and included in a
P11D form
. Employers can also choose to skip per diem payments altogether. However, these are considered taxable expenses.HMRC’s current list of foreign per diem rates can be found on their official website
.There are various ways to calculate your international per diem rate. Let’s use the example of an employee traveling on business to Geneva, Switzerland. The per diem rates for Geneva are in Swiss francs and are as follows:Subsistence type
Rate
Over 5 hours
44.60
Over 10 hours
117.50
24 hour rate
155.50 plus room rate
Room rate
207.50
Breakfast
28
Lunch
40
Dinner
69
Other
0
Drinks
8.50
Hotel to office
10
Total residual
155.50
In this example, the traveling employee arrives at Geneva Airport at 3 pm on a Monday and checks into a city hotel. They check out of the hotel on Thursday morning to catch the 9 am flight home.
The per diem payments are calculated using the benchmark HMRC rates as follows:
Period and rates
Amount
2 x 24 hour rate (3pm Monday to 3pm Wednesday
726 Swiss Francs
Wednesday night (room rate)
207.5 Swiss Francs
10-hour rate (3pm Wednesday to 9am Thursday
117.50 Swiss Francs
Total
1051 Swiss Francs
The 24-hour travel day rate is determined by adding the lodging rate. In this case, two 24 hour periods elapse, but it misses out on a third by six hours. This covers the employee until 3 pm Wednesday.
Wednesday’s room rate is then paid, and a ten-hour rate is paid to cover actual expenses from 3 pm Wednesday to 9 am Thursday.It can seem confusing initially, but after a couple of tries, calculating per diem rates isn’t hard. It’s a lesser administrative burden than keeping receipts and compiling expense reports. For more examples on how to apply per diem rates, head to the
HMRC list of examples
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GSA per diem rates for international corporate travel
In the continental United States (CONUS), domestic per diem rates are established by the U.S. General Services Administration. The Internal Revenue Service (IRS) separates expenses into “lodging expenses” and “meals and incidental expenses (M&IE).” These are rates to be used by federal employees when traveling internationally. However, they’re also used by private employees.Foreign per diem rates are established by the U.S. Department of State (DoS) via the Office of Allowances.All foreign per diem allowances can be found on the Department of State Figuring out your M&IE allowance involves first finding out the rate you’re entitled to via the Department of State
website
.Foreign per diem rates are revised monthly—stay up-to-date on the daily rates by signing up for notifications
on changes.Lodging expenses cover accommodation costs in the destination city. The amount, in dollars, is directly available on the DoS website.Multiple allowances are used when determining the M&IE rate. The full list of both domestic and foreign M&IE allowances is here
. M&IE is split into:- Meals: breakfast, lunch, and dinner in the location city.
- Incidental expenses: expenses such as dry cleaning or taxi services.
foreign per diem list
.For example, say an employee is traveling to Perth, Australia. First, head to the DoS foreign per diem drop-down box and select your destination.?)
This will take you to a list of the per diem rates for individual cities in the destination country. Find your city—in this case, Perth—and find the daily M&IE rate.
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Then, head to the M&IE foreign per diem rates list and find the rate that applies to your business trip.
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After choosing a destination and checking the relevant lists, this is the breakdown of the daily M&IE rates for Perth. Employees should keep receipts and detailed accounts of when and where they spend these allowances.
Unlike when reporting per diem payments to HMRC, employees traveling from the U.S. must compile an expense report to be sent to the IRS. If not, the per diem payments and reimbursements will be considered a taxable expense.
Are international per diem allowances taxed differently?
Taxation on foreign per diem allowances is no different from taxation on domestic per diem rates. As long as they adhere to the regulating authorities’ guidelines, per diem payments are exempt from taxation.A major difference between the UK and the U.S. per diem payment system is that the IRS always requires expense reports. Since the
Finance Act of 2019
, UK employers don’t have to provide expense reports or receipts if per diem allowances adhere to the benchmark rates.This isn’t the case in the U.S.—expense reports must be filed for every instance of expenditure, showing the time, place, and purpose of the business trip.Wrapping Up
International per diem allowances aren’t more complicated than domestic rates. They vary depending on the country of origin and destination. However, the way they’re handled is similar.Nowadays, corporate travel isn’t just for big businesses. Small businesses are also sending travelers on business trips more often, and the tax benefits of per diem rates are worth understanding. For more information on per diem rates, check out the rest of the
TravelPerk guide on per diem rates.
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