What is the Expense Policy Reimbursement in Pakistan?

Modified on: Mon, 17 Nov, 2025 at 6:45 PM

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.

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