Executive takeaway. In the Philippines, per diem (a daily travel allowance) is a policy-driven benefit—not a statutory wage component—used to defray meals, lodging, and incidentals during official/business travel. If the employer, sponsor, or host already provides some or all of these items (e.g., hotel is prepaid, or meals are included), per diem is typically reduced or disallowed for the overlapping components under the rules that apply to you (government or private) to avoid double recovery. Tax treatment hinges on whether the allowance is properly documented and reconciled.

This article explains eligibility rules, reductions when benefits are provided, tax implications, computation models, sample policy language, and common pitfalls.

1) What “per diem” covers—and why it’s reduced

A per diem is normally structured as either:

All-in daily amount (one figure intended to cover Meals & Incidental Expenses (M&IE) and Lodging), or
Split: a Lodging component (hotel) and an M&IE component (meals + incidentals), sometimes with an explicit Incidental sub-cap (tips, local transport within the destination, minor fees).

No double-dipping rule. If an employee receives a covered benefit in kind (e.g., the company pays the hotel directly, or a conference serves conference meals), the corresponding per diem piece should be reduced or removed. This is both a control (to prevent unjust enrichment) and a tax safeguard (to keep the allowance non-taxable where possible).

2) Government vs. private sector: different baselines

A) Government personnel (national government agencies, GOCCs, LGUs)

Per diem (often called “Daily Travel Allowance” or DTA) is governed by agency/COA/DBM rules.
Typical features:
- Pre-approved travel authority and itinerary.
- Rate ceilings by location/class of city or by “foreign vs. local” travel.
- Reductions where lodging or meals are furnished at no cost (e.g., billeting, host agency provides meals, hotel breakfast included).
- Travel days (departure/return) may be paid at reduced fractions.
- Actual lodging reimbursement (with receipts) may be allowed in lieu of the lodging per diem, but not both.
- No-Balance concept does not apply here; rather, “no overlap” applies—if lodging is paid by the agency directly, the lodging per diem is not claimable.

Bottom line for government: Claim the component that you actually incurred and were not already furnished; comply with documentary requirements, ceilings, and fractional rules for travel days.

B) Private sector (employees of private entities)

There is no Labor Code mandate to pay per diem. It is a contract/policy benefit.
Employers typically choose either:
- A flat per diem (no receipts for meals/incidental piece; receipts for lodging only if not prepaid), or
- Actual expense reimbursement (receipts required), or
- A hybrid (e.g., hotel prepaid by company; per diem only for M&IE).
Eligibility and reductions are determined by company policy (and often mirror internal audit and tax-compliance needs).
Key labor rule: Per diem cannot be used to offset statutory wage/OT obligations. Travel time compensation rules still apply separately.

Bottom line for private sector: Your written policy controls—spell out when per diem applies, how it’s reduced, and what documentation is needed.

3) When meals and/or accommodation are provided: how eligibility changes

Common scenarios and treatment

Hotel prepaid by employer; no meals provided
- Lodging: Not claimable (already provided).
- M&IE: Claimable at 100% of the M&IE rate.
Hotel prepaid and breakfast included
- Lodging: Not claimable.
- M&IE: Reduced to exclude breakfast portion (see §4 for split models).
Full board (three meals) provided by host/conference
- M&IE (meals portion): Not claimable.
- Incidentals: Often still claimable as a small fixed amount (if the policy recognizes an Incidental component).
- Lodging: Claimable only if not provided.
Billeting/dorm provided (no hotel costs)
- Lodging: Not claimable.
- M&IE: Claimable (subject to meal-inclusion reductions).
Per diem versus actual lodging
- If policy allows actual lodging reimbursement (with ORs) instead of a lodging per diem, you must choose one mode for the trip segment. No combining.
Layovers/overnight transit
- If airline or agency provides hotel & meals, per diem reduces accordingly; if only a meal voucher is provided, reduce meal portion for that meal.
Team events with catered meals (but not all meals)
- Reduce per diem only for the meals actually provided.

4) Split matrices and reduction methods (how to compute)

Because policies vary, adopt a clear matrix. Two widely used approaches:

Approach A — Percentage allocation of M&IE

Allocate M&IE across meals and incidentals, e.g.:
- Breakfast 20%, Lunch 30%, Dinner 40%, Incidentals 10% (= 100% of M&IE).
If hotel includes breakfast → deduct 20% of M&IE for that day.
If the event provides lunch and dinner → deduct 70% of M&IE; pay 30% (breakfast + incidentals) if not provided.

Approach B — Flat-meal deductions

Assign fixed peso values per meal within the M&IE cap (e.g., ₱X breakfast, ₱Y lunch, ₱Z dinner, ₱I incidentals).
Deduct the exact meals furnished; pay the remainder.

Travel days (departure/return). Many policies pay a fraction of M&IE (e.g., 75% or 50%) on travel days, recognizing partial meal opportunities. If meals are also provided (e.g., airline meal), deduct whichever is stricter (fractional rule and meal deduction).

Tip: Publish your matrix in the policy to remove discretion, simplify audit, and support tax compliance.

5) Proof and process (controls you actually need)

Pre-approval: Travel order, business justification, itinerary.
Attendance proof: Boarding passes, e-tickets, conference badges, agenda.
Evidence of provided benefits: Hotel voucher, conference program listing catered meals, airline meal voucher, host confirmation.
Liquidation: Per diem claims form showing daily breakdown and deductions for provided meals/lodging; ORs only where the policy requires (e.g., actual lodging).
Cutoff: Submit liquidations within policy timelines; unliquidated advances convert to receivables and may become taxable per policy/tax rules.

6) Tax treatment (high level, private sector focus)

Non-taxable (to the employee) when:
- The per diem/allowance is reasonable, business-related, documented, and properly liquidated/reconciled under an accountable plan–type policy (advance + liquidation; or reimbursement based on a per diem schedule), and
- There is no excess beyond policy caps (or excess is returned).
Taxable (as compensation/fringe) when:
- It’s a fixed travel allowance paid regardless of travel, or
- No liquidation or inadequate substantiation, or
- Excess amounts (beyond policy) are kept by the employee, or
- The allowance is used for personal, non-business purposes.

Practical rule: Document purpose, dates, destination, and reductions for provided benefits. Treat any unreturned excess as taxable and subject to withholding.

7) Interaction with labor standards

Per diem is distinct from wages. Employers must still comply with:
- Minimum wage, overtime, night differential, rest day/holiday pay where applicable.
- Travel time compensation rules (if travel occurs during hours considered hours worked).
Per diem cannot waive wage/OT obligations and cannot substitute for expense reimbursement where receipts are required by policy or law (e.g., certain visa/immigration fees).

8) Worked examples

Example 1 — Hotel prepaid + breakfast included; partial conference meals

Policy M&IE = ₱1,200/day; split: B20/L30/D40/I10.
Day 1 (arrival): Travel day fraction 75% of M&IE = ₱900; conference provides dinner.
- Dinner portion (40%) of full M&IE = ₱480.
- Apply stricter rule: Start with ₱900 (travel day), then deduct meal actually provided in proportion to full M&IE or prorate—your policy must say which. A clean method is: deduct ₱480, pay ₱420.
Day 2 (full day): Breakfast included in hotel + conference lunch.
- Deduct 20% + 30% = 50% → Pay ₱600 M&IE.
Lodging: ₀ (prepaid).

Example 2 — Full board and lodging provided by host (training center)

M&IE: Meals 0% payable; Incidentals 10% may be allowed if policy says incidentals are not covered by the host.
Lodging: 0 (provided).

Example 3 — Actual lodging vs. lodging per diem

Policy allows either: lodging per diem ₱2,000/night or actual lodging with ORs up to ₱2,800/night.
Employee presents ORs totaling ₱2,600/night.
Choose “actual”; no lodging per diem.
M&IE still payable (subject to meal deductions).

9) Model policy clauses (you can adapt)

Scope & Purpose “Per diem covers meals and incidentals; lodging may be covered by prepaid booking or lodging per diem/actual lodging. The allowance applies only to approved official travel.”
Reductions for Provided Benefits “Per diem shall be reduced by the value of any meals and/or lodging furnished at no cost (hotel breakfast, catered conference meals, host-provided billeting). M&IE is allocated as Breakfast 20% / Lunch 30% / Dinner 40% / Incidentals 10% unless updated.”
Travel Day Fraction “On days of departure and return, M&IE is payable at 75%. Meal deductions still apply if a provided meal is received.”
No Overlap Rule “Employees may claim either actual lodging (with official receipts) or lodging per diem, but not both for the same night.”
Documentation & Liquidation “Claims must include itinerary, proof of travel, and disclosure of provided meals/lodging. Liquidate within 10 business days of return; unliquidated balances will be deducted/withheld and may be treated as taxable income.”
Tax Compliance “Per diem paid/retained in excess of policy or without liquidation is taxable and subject to withholding.”

10) Frequent mistakes (and how to avoid them)

Paying full per diem despite hotel breakfast → Deduct breakfast per matrix.
Ignoring catered lunches/dinners in conferences → Deduct those meals.
Claiming lodging per diem when hotel was prepaid → Disallow lodging per diem.
Mixing modes (actual lodging and lodging per diem) → Choose one per night.
Flat monthly “travel allowance” labeled as per diem → likely taxable; use trip-specific, liquidated per diems instead.
No documentation of travel purpose → risks disallowance or taxation.

11) Quick eligibility checklist

Approved travel (order/authority/itinerary).
Accurate destination & dates (including travel days).
Identify what’s provided (hotel voucher, meal inclusions).
Apply reductions per matrix (breakfast/lunch/dinner/incidentals).
Pick mode for lodging (actual-with-ORs or lodging per diem).
Liquidate on time; return excess.

12) Key takeaways

Per diem is a policy tool to cover travel-related subsistence—not a guaranteed wage item.
Provided meals/lodging require reductions to avoid double recovery and tax risk.
Use a published split (percentages or flat per-meal values) and apply travel-day fractions transparently.
Choose one lodging mode (actual or per diem) per night.
Proper documentation and liquidation keep the allowance non-taxable and audit-ready.

If you share your current policy (or the absence of one), your typical destinations, and whether hotels/meals are usually pre-arranged, I can draft a tailored per diem matrix (domestic/foreign), a one-page reduction table, and a liquidation form that will pass audit and keep taxes clean.