The Latin term “”per diem”” literally means “”per day.”” In a business setting, the term stands for the daily allowance employees can get to cover expenses such as lodging, meals, and entertainment when on a business trip.Per Diem rates are likely to differ based on whether the employee travels in his or her home area, away from home, or internationally. Most jurisdictions allow the use of per diems, but each with its own conditions and maximum amounts.
Per Diems are intended to cover employee expenses related to the business and not to serve as an additional perk, they are in essence non-taxable. When a company decides to grant a higher per diem than the maximum amount, this will be considered “income” of the employee and be taxed that way. Working with Per Diems instead of with actual expenses may be easier for companies, as it eliminates the need for employees to prepare, and employers to scrutinise, a detailed expense report with supporting receipts to document amounts spent while travelling on business.