The process of the expense notes and the reimbursement of company expenses is subject to specific rules. Expense allowances are paid in the pay slip following an expense report and are used to reimburse the employee for costs incurred for work reasons. These are costs that the company has to calculate within its company budget. For employees, the reimbursement of travel expenses can commonly take the form of either a pre-agreed lump sum or a figure including all charges such as mileage, accommodation and food. Obviously, all these expenses must be properly documented, especially when it comes to travel and transport where there is usually a mileage reimbursement. There are three main types of reimbursement systems for business expenses: analytical, lump-sum and mixed.

Analytical expenses reimbursement

It provides for payment directly commensurate with the amounts actually spent by the employee during his business trip. He must therefore always include a list of all the proofs of expenses, such as receipts or tax receipts, invoices, tickets, and so on.

Deductibility limits for the employee:

Unlimited (these amounts do not contribute to the formation of income and will therefore never be taxed).

Deductibility limits for the company:

Unlimited à for board and lodging expenses up to € 180.76 for travel in Italy and up to € 258.23 for travel abroad

75% à for board and lodging expenses over € 180.76 for transfers in Italy and over € 258.23 for transfers abroad.

Lump-sum expenses reimbursement

It provides the reimbursement of a generic amount estimated previously. The amount of the lump-sum reimbursement is usually calculated on a daily basis. In this case it is not necessary to submit receipts and fill in the expense report, but travel and transport documents must be submitted as they are fully deductible for companies without any spending limits. Any difference between the lump-sum reimbursement and the actual amount spent will be in charge of (or benefit) the employee.

Deductibility limits for the employee:

Up to € 46.48/day for travel in Italy and up to € 77.47/day for travel abroad. Reimbursements exceeding these values will be taxable and therefore taxed.

Deductibility limits for the company:



Mixed expenses reimbursement

It provides the compensation for the expenses incurred (analytical reimbursement, which can be checked by the documentation) and a lump-sum allowance. For companies, these expenses have no deductibility limit. While for employees the taxability limit changes depending on the type of system chosen and applied.

Deductibility limits for the employee (reduced by 1/3 compared to the lump-sum reimbursement):

up to € 30.99/day for travel in Italy and up to € 51.65 for travel abroad.

These limits apply if the lump-sum reimbursement is applied to only one of the expense items (e.g. food or, alternatively, accommodation).

If the lump-sum reimbursement is applied to both food and accomodation, the maximum tax-exempt reimbursement limit is € 15.49 in Italy and € 25.82 abroad.

Deductibility limits for the company:



Record keeping

The law requires that the original documentation is kept by the company with supporting documents attached to each expense report. This is important for the purposes of any checks that need to be carried out in order to clarify the expenses. Food and lodging expenses can be documented by an invoice, which must be billed to the company so that VAT can be deducted. Receipts and tax receipts are also useful, while for travel expenses and transport documents (named tickets) must be presented. The documents must be kept for 10 years after the last registration. The Tax Office has specified that all tax-relevant information documents must be unalterable, authentic and intact.