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

Paying for an employee’s travel, meals or accommodation is routine in any small business. The question is how to do it without the tax authorities treating it as salary, with personal income tax (IRPF) withholding and Social Security contributions attached. The key is to distinguish between travel expenses and per diems (which can be exempt) and benefits in kind such as meals (which have their own rules).

Mileage: how much can an employee receive tax-free

When an employee uses their own vehicle for a trip on the company’s behalf, the IRPF Regulations allow a tax-exempt amount per kilometre to be paid. The general limit is €0.26 per kilometre, a figure worth checking in case it is updated. Tolls and parking are also exempt on top of that amount, provided they are backed by a receipt or invoice.

For the exemption to apply, the trip must take place outside the employee’s usual workplace and normally in a different municipality. Commuting from home to the office does not count. A simple example: a sales rep drives 300 km in one day of client visits. At €0.26/km, the company can pay €78 tax-free. If it paid €0.40/km (€120), the €42 excess would be salary.

Note: the exemption applies to what an employee receives. If you are self-employed and use your own car, you cannot simply deduct €0.26/km: you are taxed on the vehicle’s actual expenses, and only to the extent the vehicle is used for the business.

Per diems: meals and accommodation

Per diems compensate for meals and accommodation when an employee travels away from their usual workplace and their home. They are exempt up to daily subsistence limits set by the IRPF Regulations, which depend on three variables:

• Whether the trip is within Spain or abroad (the limit is higher for foreign travel).
• Whether there is an overnight stay or not (with an overnight stay the limit is roughly double).
• Whether the accommodation cost is documented: in that case it is exempt for its actual amount, with no cap.

As a rough guide, for trips within Spain without an overnight stay the limit is around €27 per day, and with an overnight stay €53. Always check the current figures before setting your company policy. In addition, the trip must last a minimum amount of time during the day and be tied to genuine work in another municipality. If the company pays more than the limit, only the excess is treated as cash remuneration.

A common case: an employee travels to another city and stays one night. The company pays the hotel (€300, documented) and gives them €53 for meals. All of it is exempt. If it gave them €80, €27 would be taxable.

Everyday meals: vouchers, cards and canteens

Day-to-day meals, without any travel, work differently. If the company provides a canteen, or meal vouchers and cards, this counts as a benefit in kind, but it is exempt up to €11 per day provided certain conditions are met: only for days actually worked, use at food service establishments, and no exchanging the voucher for cash or accumulating it. Anything above that daily amount is taxable.

Documentation: what you will be asked for in an inspection

Without paperwork, the exemption falls apart. Always keep:

• A trip record: date, origin, destination, purpose and kilometres (for mileage).
• Full invoices (not just simplified receipts) for hotels, tolls and parking.
• An internal document setting out the per diem policy and amounts, signed by or communicated to the employee.
• Proof of payment by electronic means whenever possible.

The most common mistakes are paying a fixed monthly amount “for expenses” without documenting any trips, including the home-to-work commute, or failing to separate the exempt portion from the taxable portion on the payslip. Any of these can end in adjustments to withholdings and contributions.

At Zythos Business we help freelancers and small businesses design a clear expenses policy, reflect it correctly in payroll and accounting, and organise their documentation so that, if an inspection comes, every euro paid has its supporting document and correct tax treatment.