Mileage, Per Diems, and Meals: What a Company Can Pay Without It Counting as Salary

When an employee uses their own car to visit a client, or the sales team eats out while traveling for work, the company can reimburse those costs without the tax authority treating it as disguised payroll. That reimbursement is known as an allowance for travel and subsistence expenses, and Spain’s Personal Income Tax Regulations set the amounts that stay exempt from taxation and withholding. Go over those limits, or fail to document them properly, and the excess becomes ordinary taxable pay, with the corresponding withholding and income tax for the employee.

Which expenses qualify, and what the exempt limits are

The exemption covers trips away from the employee’s regular workplace for business reasons — it doesn’t apply to the daily commute to and from the office, which counts as a personal expense, not a per diem. Within that category there are three types of allowance:

Mileage: when an employee uses their own vehicle, the company can pay a per-kilometer rate that stays exempt up to the regulatory cap (currently around €0.26/km, following the latest update), plus tolls and parking that are backed by an invoice. Any amount paid above that per-kilometer rate is taxed as salary.

Subsistence (meals): the exempt amount depends on whether the trip involves an overnight stay and whether it takes place in Spain or abroad. As a rough guide, without an overnight stay the exemption typically runs to around €26.67/day within Spain (about €48 abroad); when an overnight stay is required, those figures roughly double, to around €53.34 and €91 respectively. These are reference figures worth confirming against the current regulations before applying them, since they’ve been revised in recent years.

Lodging (hotel): unlike mileage and subsistence, accommodation costs have no fixed cap set by the tax authority — they’re exempt for the actual amount spent, provided they’re backed by a full invoice issued to the company or to the traveling employee.

Paper trail: where most inspections fall apart

The exemption isn’t automatic just because a payment falls “within the limits” — the company needs to be able to prove three things if the tax office asks. First, that the trip actually happened: the date, destination, and business reason for it (an expense note, a meeting invitation email, a purchase order, or a client visit all work as evidence). Second, the mode of transport used, which matters most for mileage, where it’s worth keeping a log with the date, route, distance, and purpose of each trip. Third, for lodging — and for subsistence if the company opts to reimburse actual costs rather than apply the per diem rate — the corresponding invoice.

For self-employed workers who apply these allowances to themselves as a deductible expense, the law also requires the payment to be made through a traceable electronic method (card, bank transfer) rather than cash, along with a record of the date, location, and reason for the trip. Without that paper trail, the tax office can reject the deduction entirely, not just the excess.

Common mistakes to avoid

The most frequent one is paying a flat “monthly allowance” that’s the same every month, unconnected to actual trips — at that point it stops being a per diem and becomes regular pay, regardless of how it’s labeled. Another common error is confusing mileage with subsistence and applying the wrong limit, or treating meals eaten within the employee’s own city — with no travel outside the usual workplace — as if they were exempt per diems. It’s also easy to forget that when the excess over the exempt limit is taxed as salary, it can affect Social Security contributions too, not just income tax. And it’s worth remembering that these exemptions are designed for employees or self-employed workers who travel for work; client entertainment expenses (meals, hospitality) follow different rules, with their own deductibility limit under Corporate Income Tax.

At Zythos Business, we work with each client to properly document mileage, per diems, and travel expenses before they hit payroll or the tax return, so the company doesn’t overpay in taxes and the employee doesn’t get hit with an unexpected withholding. If you’re unsure which of your specific business trips can be reimbursed tax-free, it’s better to review it in advance than to fix it during an inspection.