This guide explains how employees can claim business-related expenses in Pakistan, including documentation requirements, tax considerations, and best practices.
General Principles
Expenses must be wholly and exclusively for business purposes to qualify for reimbursement and corporate tax deductibility.
All claims should be reasonable, justifiable, and supported by proper documentation.
Documentation Requirements
For every reimbursed expense,submissions must include:
Employee name
Travel dates
Business purpose
Origin/destination
Distance traveled (for mileage)
Mode of transport and class of travel
Cost
Supporting receipt or invoice
Invoices/receipts are mandatory for most claims, especially where VAT recovery or tax deduction applies.
Travel & Transport Expenses
Air/train/bus fares: Reimbursable if business-related, with ticket/receipt and documented purpose.
Taxi/rental cars: Require invoice/receipt, business purpose, and employer approval.
Parking and tolls: Reimbursable separately with receipts.
Personal vehicle use:
No fixed statutory mileage rate for private firms.
For reference, government rates (Finance Division) are:
Car/taxi: Rs 15 per km
Motorcycle/scooter: Rs 6 per km
Bicycle: Rs 3 per km
Public transport: Rs 3.75 per km
Mileage claims must include a travel log (date, route, distance, purpose).
Accommodation & Meals
Hotel costs for out-of-town business travel: Invoice should ideally be addressed to the company or employee, with business purpose documented.
Meals and entertainment: Allowed if incurred during business meetings; subject to internal policy and entertainment rules.
Per Diem Allowances
No official corporate per diem rates published in Pakistan.
Companies should set reasonable internal rates, ideally aligned with government allowances.
Per diems must:
Be linked to documented business travel.
Follow internal policy.
Avoid excess amounts that could be treated as taxable benefits.
Tax Treatment
Business-related reimbursements: Typically not taxable to employees if properly documented.
Non-business or personal expenses: Taxable as employment income.
Wellness expenses (gym, therapy, etc.): Generally taxable unless part of an approved corporate wellness program.