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Home Customs & Border Control Policy Unit Technical Taxation of 'Per Diem'


Section 5(2)(a) of the Income Tax Act imposes tax on subsistence, travelling, entertainment or other allowances received by an employee in respect of employment or services rendered. However, where the Commissioner is satisfied that the amounts so received solely represent reimbursement to the employee, the same shall not be chargeable to tax.

These guidelines are issued to clarify the procedures to be applied in determining the tax status of per diem payments.

    1. In these guidelines, 'per diem refers to payments in respect of subsistence, travelling, entertainment and other allowances made by an employer to his employee while the employee is on official duties outside his usual station of work.
    2. Where a person avers that per diem solely represents reimbursement, he shall furnish supporting evidence to the Commissioner, provided that where the amount does not exceed two thousand shillings per day, no such proof shall be required.
    3. For the purposes of satisfying the Commissioner that the amounts paid are reimbursements of costs incurred by the employee, an employer shall maintain a documented policy on the management of per diem.
    4. The policy referred to under 3 shall include information relating to:
      1. The rates applicable for different cadres of employees to whom per diem may be payable.
      2. The rates applicable to different geographical zones or localities within the country.
      3. The rates applicable where duties involve overseas travel provided that where different rates apply, these are to be clearly stated.
      4. A justification for the rates used in relation to among other things, the cost of living.
      5. The procedure of accounting for per diem.
    5. The Commissioner may, at any time where he deems appropriate, require an employer to furnish him with documentary proof of travel outside the work station by his employee and such proof may include:
      1. motor vehicle work tickets.
      2. bus or air tickets.
      3. passport and immigration entries.
      4. imprest accounting documentation.
    6. Employers may if they deem it appropriate, seek the Commissioner's opinion regarding the admissibility of proposed per diem scales prior to or after payment.

Tax due on per diem is to be recovered in the payroll month relating to the payment and remitted in accordance with PAYE procedures.


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