Here’s a comprehensive, practitioner-oriented explainer on how Philippine tax rules treat per diem travel allowances—especially where employees don’t submit receipts. It’s written for HR, finance, and in-house counsel who need policy-level clarity and audit-proof execution.

BIR rules on per diem travel allowances without receipts (Philippine context)

1) What “per diem” is—and why tax treatment hinges on accountability

A per diem is a fixed daily allowance given to an employee to cover ordinary and necessary travel expenses (e.g., meals, lodging, local transport, incidentals) while on official business away from his/her tax home.

Under the National Internal Revenue Code (NIRC), an employer may deduct ordinary and necessary business expenses if they are substantiated and not excessive, and employees need not be taxed on amounts paid for the employer’s convenience. In BIR practice, two big forks determine the outcome:

Accountable/“liquidated” travel allowance (treated like reimbursement): non-taxable to the employee; deductible to the employer.
Unaccountable/fixed allowance (no liquidation/return of excess): taxable—either as compensation (rank-and-file) or fringe benefit (supervisory/managerial, subject to Fringe Benefit Tax).

Key idea: The BIR looks less at the label (“per diem”) and more at how it’s controlled, documented, and liquidated.

2) Legal anchors you will rely on (at a glance)

NIRC Sec. 34(A) – Ordinary & necessary business expenses; requires substantiation by “adequate records.”
NIRC Sec. 33 & implementing regulations – Fringe Benefit Tax (FBT) on benefits to supervisory/managerial employees that are not for the employer’s convenience.
Withholding rules (compensation and creditable withholding) – failure to withhold can cause expense disallowance until tax is remitted.
VAT rules – input VAT may be claimed only with valid VAT invoice/official receipt; otherwise, no input VAT credit even if the expense is otherwise deductible.

(Citations above are intentionally high-level; apply the latest versions as amended.)

3) What counts as “substantiation” if there are no receipts?

The NIRC allows expenses to be substantiated by receipts or other adequate records. For per diems, the “other adequate records” route can work if you are truly paying for business travel and you run a tight process. Auditors typically expect:

Written travel policy
- Clear per diem rates (local vs foreign; by city/country if needed).
- Coverage (meals, incidentals, local transport; rules for lodging).
- Mandatory liquidation and return of unspent cash within a set period.
- No double-dipping (e.g., if hotel or client provides meals, reduce per diem).
Authorization and proof of travel
- Approved travel order/authority to travel stating business purpose, destination, and dates.
- Itinerary/agenda, meeting invites, conference registration/email confirmations.
- Boarding passes/e-tickets, passport stamps/immigration records (for foreign).
- Trip report briefly stating who was met, what was done, outcomes/next steps.
Liquidation documents
- Signed liquidation form showing the per diem dates and amounts (and any actual receipts that do exist, e.g., hotel or airfare).
- Return of excess per policy; or payroll charge-back if unreturned.

Reality check: Auditors generally tolerate per diem without receipts for meals and incidentals when the above controls exist. Lodging and airfare usually must have receipts/official documents because they are typically issued. If lost, provide secondary evidence (e.g., airline email confirmation, credit card statement, hotel folio) and a loss affidavit—but understand this is a risk point.

4) Tax results by scenario

A) Properly controlled per diem (liquidated; excess returned)

Employee tax: Not taxable (employee incurred expenses in the employer’s business; amounts are merely advanced/reimbursed).
Employer deduction: Allowed as travel expense, provided amounts are reasonable and substantiated by the records listed above.
FBT: Not applicable (benefit is for the employer’s convenience).
VAT: No input VAT for per-diem amounts lacking VAT receipts; you can still deduct the gross expense (no input VAT claim). For hotel/airfare with valid receipts, VAT/input VAT rules apply as usual.

B) Fixed “travel/representation allowance” given monthly with no liquidation

Rank-and-file: Taxable compensation income; subject to withholding tax on compensation via payroll.
Supervisory/Managerial: Fringe Benefit Tax (FBT) on the grossed-up monetary value; FBT is a final tax on the employer.
Employer deduction: Generally allowed if you withhold the correct tax (WTC or FBT); failure to withhold can trigger expense disallowance until remedied.
VAT: Not applicable to the allowance itself; these are not purchases from VAT vendors.

C) Mixed model (per diem + actuals)

If meals/incidentals are per diem but lodging/airfare are by receipt, the tax effects follow each bucket. This is a common, audit-resilient design.

5) Foreign travel: extra scrutiny points

Foreign trips face tougher “business purpose” review. Keep:

Conference/seminar program, proof of attendance, speaking slot confirmation, or client-meeting schedules.
No companions charged to the company (spouse/family not on the payroll is a common disallowance).
Side trips/vacation legs must be personally borne.
Class of travel should be defensible (company policy; role-based or time-sensitive justification).
Use a consistent FX policy (e.g., BSP reference rate on transaction date or liquidation date), disclosed in your accounting manual.

6) Withholding interactions you shouldn’t miss

On employees:
- Non-taxable, properly liquidated per diems → no compensation withholding.
- Unliquidated/fixed allowances → withhold (WTC or FBT) in the period paid.
On suppliers:
- If your company is a Top Withholding Agent, purchases of services (e.g., hotel, transport services) may require creditable withholding at the prescribed rates when you pay the vendor. This is separate from employee taxation and helps preserve deductibility.

7) Per diem is not a de minimis benefit

The BIR’s de minimis benefits list is exhaustive (e.g., rice subsidy, uniform/clothing, laundry, small medical cash allowance for dependents, etc.). Per diems are not on that list, so they are not automatically tax-exempt; they must stand on the accountability/liquidation rules above.

8) Documentation checklist (what auditors expect to see)

Approved travel policy with per diem schedule and liquidation timelines.
Authority to travel stating purpose, destination, dates.
Itinerary/agenda; invites or client emails.
Proof of travel (tickets, boarding passes, passport stamps/visa).
Liquidation form signed by employee & approver; dates and per diem amounts per day.
Receipts for lodging/airfare where available; secondary evidence if truly unavailable.
Proof of return of excess per diem.
Trip report summarizing outcomes.
Supplier withholding evidence (if applicable).
Accounting entries consistent with policy; FX translation support for foreign trips.

9) Policy drafting tips (language you can adapt)

Scope & eligibility

“Per diem applies only to employees on approved official business travel outside their tax home.”

Rates & coverage

“Per diem covers meals and incidentals. Lodging and airfare must be supported by official receipts/tickets and are reimbursed at actual cost.”

Liquidation & return of excess

“Employees must submit liquidation within 10 business days from return and return any unspent per diem; unreturned amounts are reclassified as taxable income and subjected to payroll withholding or FBT as applicable.”

No double recovery

“Per diem is reduced for any meals/lodging provided by clients/event organizers.”

Proof of travel

“Liquidations must include travel authority, itinerary/agenda, proof of travel, and trip report.”

Tax & withholding

“Unliquidated or policy-noncompliant allowances will be treated as taxable compensation (rank-and-file) or fringe benefit (supervisory/managerial).”

10) Accounting treatment (illustrative)

Advances:

Dr Advances to Employees / Cr Cash (upon per diem release)

Upon liquidation:

Dr Travel & Representation Expense (per diem days)
Dr Travel—Lodging/Airfare (per receipts)
Cr Advances to Employees (and Cash if excess returned)

If unreturned excess / non-liquidation:

Dr Salaries & Wages (rank-and-file) or Fringe Benefits (FBT base for managerial)
Cr Advances to Employees
Record withholding (WTC/FBT) accordingly.

11) Common audit pain points—and how to avoid them

Flat monthly “allowances” labeled as per diem: If there’s no liquidation and no travel, expect tax and expense disallowance.
Missing hotel/air receipts when they obviously exist: High risk of disallowance; use secondary proofs only as last resort.
Per diem during WFH/local day trips: Per diems are for travel away from tax home; day-trip meal allowances often fail the test.
Foreign trips with thin business purpose: Keep agendas and outcomes; companion expenses are personal.
No supplier withholding by Top Withholding Agents: Can jeopardize deductibility until corrected.

12) Frequently asked questions

Q1: Are receipts mandatory for per diem? For meals and incidentals, a well-designed per diem policy plus solid travel proof can substantiate the expense without receipts. For lodging and airfare, the BIR typically expects receipts/tickets since they are normally issued.

Q2: If the employee doesn’t liquidate or return excess, what happens? Treat the amount as taxable (WTC for rank-and-file, FBT for supervisory/managerial). Failure to withhold can cause expense disallowance until you remit the tax.

Q3: Can we use government per diem rates? Government travel rules (e.g., EO-based rates) apply to the public sector. Private employers may benchmark but are not bound by them. Reasonableness still governs.

Q4: Can we claim input VAT on per diem amounts without receipts? No. Input VAT needs valid VAT invoices/official receipts. You may still claim the expense (sans input VAT) if otherwise substantiated.

Q5: Are per diems de minimis? No. They must be supported as bona fide business travel or else taxed.

13) Practical, audit-resilient design (one-page formula)

Policy: Put per diem only on travel days away from tax home; split by domestic/foreign; define coverage.
Receipts: Require receipts for lodging/airfare; allow per diem (no receipts) for meals/incidentals.
Controls: Travel authority, itinerary/agenda, proof of travel, liquidation within a firm deadline, and return of excess.
Tax switch: If late/no liquidation → auto payroll tax (WTC/FBT) the following cutoff.
Withholding on vendors: Apply if you are a Top Withholding Agent.
Documentation: Keep a tight file; missing papers are the #1 reason for disallowances.

Final note (not legal advice)

This is a consolidated view of how the BIR and auditors generally apply the NIRC to per diems. Specific outcomes depend on your facts, documents, and current issuances. When you finalize your policy or face a live audit, have counsel or your tax adviser review your exact documents and withholding posture.