Looking to hire in Canada

In Canada, employees must submit expenses and clients must approve them within the same calendar year in which the costs are incurred. Prior year expenses are not accepted under any circumstances.

Every reimbursed expense must be backed by proper tax invoices or receipts that clearly show when and where the purchase was made, the amount and currency, and what was bought or which service was provided. Missing or incomplete documentation can cause reimbursements to be treated as taxable income for the employee.

Canada allows reimbursement of work-related communication and workspace costs, but the tax treatment depends on how the service is used. Detailed tax invoices are required, and higher-value invoices must identify both the provider and the employee.

Office supplies, postal costs, laptops, other equipment, and software subscriptions can be reimbursed tax-free when they are genuinely for business use and supported by proper documentation from the supplier or merchant.

Business travel costs are generally reimbursed on a non-taxable basis when they are properly documented and clearly business-related. This includes transport, accommodation, insurance, visas, and related on-the-road costs. Mileage in an employee’s own vehicle is reimbursed at specific per‑kilometre rates.

Reasonable meal and entertainment costs incurred for business purposes can be reimbursed on a non-taxable basis when supported by appropriate receipts or transaction records that show the date, amount, and vendor.

Canada also treats several other categories of genuine business expenses as non-taxable when properly documented. Some items, such as medical exams required for work and employee gifts, have specific conditions or limits.

Bonuses and commissions are treated as special payments on top of salary and are taxed at a higher rate using the bonus tax method. This leads to higher withholdings in pay periods that include bonus payments, with any overpaid tax reconciled when the employee files their annual tax return with the Canada Revenue Agency.

Moving and relocation expenses for employees in Canada can be reimbursed as long as they meet CRA criteria. When structured as reimbursements that follow these guidelines, they can be supported under an Employer of Record arrangement.

Non-taxable per diem allowances to cover meals and incidental expenses during business travel are supported where the amount is reasonable and aligned with CRA guidance. The CRA assesses reasonableness by reference to the Treasury Board/National Joint Council Travel Directive meal rates, which are reviewed every six months (effective April 1 and October 1). As of the April 2025 revision, the commonly used benchmark for travel within Canada and the continental USA is CAD 113.50 per day, including taxes, though this is a reference point rather than a statutory rate. CRA administrative guidance separately treats CAD 23 per meal, up to a maximum of CAD 69 per day, as a presumptively reasonable flat rate in other contexts such as overtime meal benefits and the simplified method for meal-expense deductions. Per diems above the reasonable benchmark are not supported and may be taxed in full. Employers should keep documentation such as a travel itinerary or hotel booking that shows the business purpose, number of travel days, and the daily per diem requested.

Car or automobile expense reimbursements for employees who use their own vehicles for business purposes are supported, but these payments must be treated as taxable allowances through payroll. All car or automobile expenses for personal vehicles are classified as allowances. By contrast, a per-kilometre allowance can be treated as non-taxable only if it is based solely on business kilometres, is at or below the CRA prescribed rate, and employees are not also reimbursed for other vehicle expenses for the same use (other than items like tolls, ferries, or extra business insurance). If the per-kilometre allowance exceeds the prescribed rate, the entire amount becomes taxable.

Employers may also choose to offer a range of discretionary allowances. These are optional, may be offered to one or more employees at the employer’s discretion, and are treated as taxable benefits. They are submitted manually and do not require supporting documentation.