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

Paying an employee for mileage, a hotel or a meal on a business trip is not the same as giving them a pay rise. Done properly, these amounts are not taxed as employment income and, up to the exempt amount, do not count towards the withholding or social security contribution base. Done badly, the tax authorities can treat them as salary, with all the consequences: IRPF (personal income tax) withholding, social security contributions, and VAT or a non-deductible expense. This guide explains where the line is drawn.

What counts as travel and subsistence expenses

The IRPF Regulations distinguish two main categories that can be exempt from tax for the employee:

• Travel expenses: the employee’s journeys away from their usual workplace (public transport, taxi, plane, train or their own vehicle).
• Subsistence and accommodation expenses: meals and lodging when the job requires staying overnight or eating away from home.

There is a precondition that is often overlooked: the trip must be made for work reasons and away from the usual workplace and from the municipality where the employee lives. Commuting from home to the office every day does not give rise to exempt expenses, no matter how much is paid under the heading of “mileage”.

Exempt limits: per kilometre and per day

The rules set maximum amounts that are not taxed. Always check the current figure in the IRPF Regulations, as it may be updated, but the structure is as follows:

• Mileage with a personal vehicle: the per-kilometre amount set by the regulations is exempt, plus documented tolls and parking. Anything above that per-km amount is added to salary.
• Meals without an overnight stay: there is a different daily limit depending on whether the trip is within Spain or abroad, and it is lower when there is no overnight stay than when there is.
• Meals with an overnight stay: the daily limit is higher, and it also differs between Spain and abroad.
• Accommodation: the lodging expense is exempt when it is actually incurred and backed by an invoice.

An example with round numbers, not tied to the official amount: if the exempt limit were €0.20 per km and an employee drives 1,000 km in the month, €200 would be exempt. If the company pays €0.30 per km (€300), the €100 difference would become salary subject to withholding and contributions. The same applies to per diems: anything above the daily cap is remuneration.

Two important caveats. First, everyday meals in the city where you work are not an exempt per diem: unless the travel conditions are met, a “meal voucher” or a meal allowance is analysed under different rules (benefit in kind, with its own regime). Second, self-employed individuals cannot pay themselves exempt per diems: their meal expenses are deductible only under their own requirements (they must be incurred in restaurants and hospitality establishments, paid by electronic means, and stay within the daily limits). This is not the same regime as for an employee.

How to document it so it stands up to an inspection

The exemption is not presumed: you must be able to prove it. What the tax authorities usually ask for is:

• A written travel order or assignment, with the date, destination and business purpose.
• A mileage log: date, origin, destination, kilometres and the vehicle’s licence plate. A route logbook or a tidy spreadsheet will do if it is consistent.
• Invoices for hotels, tolls, parking or public transport in the company’s name, where applicable.
• Proof of payment, and confirmation that the amount paid to the employee matches what appears on the payslip as a non-taxable or exempt item.

The most common mistakes are paying a “fixed monthly amount for fuel” with no travel log, putting on the payslip as a per diem what is really a disguised salary supplement, and mixing up commuting to the usual workplace with genuine business trips. To an inspector, a lump-sum payment with no supporting records is salary.

As for deductibility for the company, the expense must be linked to the business activity, properly booked and supported by documentation. What is paid within the exempt limits is generally a deductible expense; what exceeds them and is treated as salary is deductible too, but with its withholding and contributions.

At Zythos Business we help self-employed professionals and SMEs organise these expenses from the outset: we work with you to define a travel policy, prepare travel order and mileage log templates, and check that payroll, withholdings and accounting all tell the same story. That way, what is a company expense stays a company expense, and what is not gets regularised in time.