Reimbursement or advance for travel expenses

A reimbursement is a payment you make to your employees as a repayment for amounts they spent (such as gas and meals) while conducting your business. Generally, the employee completes a claim or expense report detailing the amounts spent. Do not include a reasonable reimbursement (which is part of your business expenses) in the employee's income.

An advance is an amount you give to employees for expenses they will incur on your business. An accountable advance is one that you give to an employee who has to account for their expenses by producing vouchers and return any amount they did not spend.

Usually, a reimbursement or an accountable advance for travel expenses is not income for the employee receiving it unless it represents payment of the employee's personal expenses.

Example: Accountable advance for automobile and motor vehicle expenses

You own a sporting goods store. There is an out of town sales conference your business is participating in and you have scheduled one salesperson to attend. Two weeks prior to travel, you pay an accountable advance to your salesperson to cover expenses relating to the use of their personal vehicle to travel to and from the conference. This amount is based on the reasonable per-kilometre rate prescribed in section 7306 of the Income Tax Regulations. The salesperson will need to account for their expenses.

In this example, the advance is not considered a taxable benefit because: 

  • the rate per kilometre is considered reasonable
  • the employee has to account for their expenses by producing vouchers and must return any amount they did not spend

The employee cannot claim the expenses on their income tax return.

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