According to the World Bank, international travel doubled from roughly 600 million to 1.3 billion over the last two decades. The Global Business Travel Association also predicts a $1.6 trillion business travel market by 2020.
This clearly indicates that international corporate travel is thriving.
While it may be tempting to rely on digital communication, face-to-face meetings can create meaningful connections. In-person meetings can help you determine reliable partners and also help close deals faster. Thus, business travel becomes crucial for developing and expanding your business. But has complex corporate T&E regulation come in the way of your international business trips?
If you have resonated a sound yes to the question, you might be in for a treat. Below, we have enlisted everything you need to know about per diem allowances, best practices around per diems, and more. Let’s dive in!
Must-Knows About Foreign Per Diem Rates
- The Department of State sets the per diem rates for foreign countries.
- Employees can report lodging and M&IE (meals and incidental expenses) separately. You can find a detailed per diem breakdown here. The incidental expenses include things like room service, laundry services, tips, and taxi services.
- Per diem is not taxed like regular wages. But because of this, the IRS has stringent guidelines on the daily allowance.
- Expense reports must be filed for every instance of expenses, showing the time, place, and purpose of the business trip. If not, the IRS will consider this reimbursement as taxable.
- Additionally, lodging and M&IE must not exceed a certain amount, or else it will be considered additional income.
What are the tax rules for per diems?
How to effectively track Per Diems in an expense report form?
How To Know Foreign Per Diem Rates?
Just as the cost of living varies between cities in the United States, it also changes drastically between different countries.
- Bermuda has the highest cost of living in the world, at 190.7% higher than the United States average. This means the same $200 per diem that would cover lodging and a few nice meals in Columbus, would barely include a single room in Bermuda.
- On the other hand, India's cost of living is only 31.3% than that of the United States. This means the same $100 would be far more than you would need to cover expenses while on business travel in India.
Luckily, deciding the right per diem rate doesn't need to be a guessing game.
The State Department (also commonly referred to as the United States Department of State) is responsible for carrying out foreign policy and international relations. The State Department sets specific allowances in the DSSR 925. These standardized regulations help businesses ease their expense reimbursements while also ensuring they are always audit-ready.
The Office of Allowances publishes the foreign per diem rates on a monthly basis.
To find the latest per diem rate of any country, visit the State Department's Office of Allowances website. Here, you can find rates of any country or city by just typing the name of your destination!
How Can Your Business Better Manage International Per Diems?
In today's global economy, international commuting is no longer just in the realm of massive corporations. Even small businesses are traveling to other countries to do work with suppliers, partners, and customers.
If your company has a lot of employees traveling overseas in a year, it's paramount that you keep track of their international per diems to avoid running into issues at tax time. If you need help tracking your business travel and expenses (T&E), let us help.
Fyle is a travel and expense management software made to streamline tedious T&E processes and take care of manual expense reporting. No matter where your employees travel, get all T&E details under one platform and keep track of business expenses.
Schedule a demo today to see how we can give your company the financial and productive boost it deserves!