A travel expense is a fee an employee takes on when travelling for work. It includes everything from transportation to meals, each with its own reimbursement rules.
What counts as a travel expense?
An item is tied to travel expenses when it results directly from a work trip. The most common items are the following:
- Public or private transportation: tickets, taxis, vehicle rental, parking, and tolls.
- Mileage, when the employee uses a personal vehicle. This item follows a separate rate, based on the distance driven.
- Lodging, meaning the hotel charges when the employee cannot return home.
- Meals during the trip, reimbursed at the actual amount or at a set rate.
Each item should be backed by supporting proof, as with any expense report: an invoice, an itemized receipt, or a transit ticket.
An expense management tool brings these items together in one place and ties each receipt to the reimbursement request.
Is a travel expense reimbursement taxable?
As a rule, a travel expense reimbursement is not taxable. The employee gets back an amount they had advanced for work; it is not income. It therefore does not appear on their T4 slip.
The tax treatment depends on the form of the payment. A reimbursement, paid against supporting receipts, is not taxable as long as it covers a real work-related expense. An allowance or per diem, meaning an amount paid without the employee having to account for its use, follows a stricter rule: according to the Canada Revenue Agency, it is not taxable only if it is reasonable. For the use of a vehicle, an allowance is treated as reasonable when it is based solely on the number of kilometres driven. A flat or fixed allowance that does not rest on that basis is added in full to the employee’s income and reported on their T4 slip.
How long must an employer keep travel expense records?
On the employer’s side, reimbursement requests and their supporting receipts are kept for six years. That period starts from the end of the last tax year involved. This rule comes from the Canada Revenue Agency and provincial entities like Revenu Québec.
