A per diem (from the Latin for per day) is a daily stipend given to business travellers to cover food and incidental expenses while they’re on the road. It’s not, in fact, a perk to make up for the inconvenience of being away from home – or a little extra spending money to splurge on spoils and souvenirs.

As Arlette Manyi, Tax Risk Manager at FirstRand Bank Limited explained at the recent GBTA Southern Africa Conference in Johannesburg, per diems can have unforeseen tax implications if travellers (and employers) don’t tow the line when it comes to their travel and expense policy.

SARS per diem tax guidelines

The South African Revenue Service (SARS) updated both their local and international subsistence allowances in February 2024. While foreign subsistence allowances differ country by country, travel within the Republic of South Africa is pegged at either R522 per day (for all meals and incidentals) or R161 per day (for incidental costs only).

Many people don’t realise that SARS has these guidelines in place – or that per diems are regulated by the Income Tax Act of 1962. According to the act, per diems are not subject to personal income tax if they fall within the limits set by SARS. But things become tricky if they do not appear on your payslip, are not reported to SARS, are not used for their intended purpose or exceed legislated limits.

Luckily, you don’t need to keep receipts from a business trip if your per diem allowance is within the limit set by SARS. But if you’ve been given more than the deemed amount (for local or international travel) you need to keep your receipts for five years. SARS can look at your travel spend if you are ever audited, and if you are found non-compliant the interest and penalties can put both you and your company at risk.

When you file your tax return, SARS has the right to check where you have travelled and even ask you to prove it was for business. They may look at how you’ve spent your per diem allowance and flag non-compliance.

A clearly worded travel policy is invaluable

With SARS cracking down, make sure your travellers know exactly how much they have to spend on food or incidentals per day, and what they can spend it on. For example, if their hotel accommodation is on a B&B basis, employees may be allowed to expense a certain amount for lunch and dinner, but not breakfast or alcoholic beverages. Also, make it clear if unspent funds should be returned to the company.

It’s also important to agree on what the term ‘incidental’ might cover. For example, parking fees or laundry costs might be acceptable, while gifts for the team back home might not!

Business travellers should avoid these five bad habits:

• Luxury splurges

While designer swag might be tempting, your expense account is not a licence to shop. Any purchases beyond necessary business travel expenses could land you in hot water – with both your boss and SARS officials.

• Skipping meals

Redirecting money from food to shopping is not what your per diem is for. Proper meals are an important part of your trip and essential for your health and productivity.

• Per diem piggy-banking

Similarly, while squirreling away your subsistence allowance for a rainy day might seem like a good idea, it definitely won’t be in the spirit of your company’s travel policy (keep in mind too, that consistent underspending might affect future allowances).

• Souvenir overload

Bringing back gifts for the entire office? Reconsider. While a small token might be fine, excessive gift-buying can appear unprofessional and wastes company resources.

• Unexpected tech spend

Panic buying gadgets at the airport can burn through your daily allowance. Instead, plan ahead. Make a list of everything you might need (from power banks and charging cables to travel adapters) and ensure they’re safely stored in your carry-on bag.

In conclusion

If you’re updating your travel policy – or developing one for the first time – it’s worthwhile approaching a travel management company for advice.

Often travellers don’t understand how per diem allowances are taxed. They’re not sure when, or how, to log their expenses, or what purchases might be considered non-compliant. A Travel Management Company (TMC) can you help you put clear guidelines in place and answer any questions you might have.

Bonnie Smith | General Manager | FCM Travel Solutions | mail me |

Related FAQs: Per diem tax guidelines

Q: What are per diem rates and how do they apply to business travel?

A: Per diem rates are daily allowances for employees traveling for business. These rates cover lodging, meals and incidental expenses, ensuring that employees are reimbursed for their travel costs without needing to submit individual receipts.

Q: Are per diem payments considered taxable income?

A: Per diem payments are generally not considered taxable income as long as they are used for business-related travel and fall within the established per diem rates. However, any amounts reimbursed that exceed SARS’ per diem rate may be subject to taxes.

Q: How does SARS define per diem reimbursements?

A: SARS defines per diem reimbursements as payments made to employees for travel expenses incurred during business trips. These reimbursements should align with the purpose of the trip and match the applicable per diem rates to avoid being classified as taxable income.

Q: What types of per diem are available for employees traveling for work?

A: There are various types of per diem, including standard per diem rates for meals and incidental expenses, lodging per diem and specific rates based on location. Employers may choose to pay per diem according to SARS rates or set their own based on company policy.

Q: How do I document my per diem expenses for reimbursement?

A: To document per diem expenses for reimbursement, you should fill out an expense report detailing the business purpose of your trip, the dates of travel and the per diem amount claimed. Receipts are not required for per diem payments, but it’s essential to maintain records of your travel itinerary.

Q: Can employers set their own per diem policies?

A: Yes, employers can establish their own per diem policies as long as they comply with tax regulations. However, it’s common for companies to use SARS rates as a benchmark to determine appropriate per diem amounts for their employees.

Q: What are the benefits of using per diems for employee travel?

A: The benefits of per diems include simplifying the reimbursement process, providing employees with a clear understanding of their travel allowances and reducing the administrative burden of collecting receipts. It also helps ensure that travel expenses stay within budget.

Q: What should I do if my per diem reimbursement exceeds SARS’ per diem rate?

A: If your per diem reimbursement exceeds SARS’ per diem rate, the excess amount may be classified as taxable income. It’s important to consult with your employer or a tax professional to understand how to handle this situation and ensure compliance with SARS guidelines.