Expense reimbursement
is repayment of costs employees incur for work — travel, equipment, client entertainment — against receipts or approved scales. Done correctly it is tax-free for the employee and deductible for the employer; done loosely it becomes taxable salary and an audit finding.
Policy rules that survive audits
Reimburse actual, documented, business-purpose costs — receipts attached, approver identified, category limits published. Where scale allowances exist (per diems, home-office and mileage rates), use the official figures; where they do not, itemise. Recurring round-sum ‘expense’ payments without evidence are salary by another name in most tax systems.
For contractors, expenses belong in the commercial rate or the service invoice — reimbursing contractors like employees adds an integration indicator to the classification picture. See per diem.
FAQ
Can we reimburse home-office costs tax-free?
Many countries now provide flat home-office allowances or defined tax-free reimbursements (equipment, internet shares) with annual caps; others tax anything beyond equipment loans. The post-2020 rules settled differently per state — check current-year limits rather than pandemic-era memory.
How long should expense records be kept?
With payroll and accounting records — typically 5–10 years by country. Digital receipts are broadly accepted where storage is audit-proof; the requirement is reproducibility, not paper.