Table of Contents
1. Policy Overview
Purpose
This policy establishes guidelines for the reimbursement of reasonable and necessary business expenses incurred by employees of [COMPANY NAME]. The policy ensures fair, consistent, and compliant expense management while protecting the company from fraud and unauthorized spending.
Scope
This policy applies to all employees, contractors, and authorized representatives of [COMPANY NAME] who incur business expenses while conducting company business. It covers all expense categories including travel, meals, entertainment, office supplies, technology, and professional development.
Effective Date: [DATE]
Applies to: All employees of [COMPANY NAME]
Policy Owner: [CFO/FINANCE DIRECTOR NAME]
Review Cycle: Annually (last reviewed: March 2026)
Core Principles
- Reasonableness: Expenses must be ordinary and necessary for business purposes
- Compliance: All expenses must comply with IRS (US) and CRA (Canada) regulations
- Transparency: All expenses require receipts and clear business justification
- Timeliness: Submissions must be made within 30 days of expense incurrence
- Accountability: Approval hierarchy ensures appropriate oversight at all levels
2. Expense Categories & Limits
Travel Expenses
| Category | Limit / Guidelines | Notes |
|---|---|---|
| Airfare (Domestic) | Economy class only | Book 14+ days in advance. No exceptions without VP approval |
| Airfare (International) | Economy class; premium economy for 8+ hours | Requires Director approval; book 30+ days in advance |
| Rail & Ground Transport | Standard/coach class | Rideshare via Uber/Lyft for ground transport |
| Car Rental | Mid-size or smaller | Basic insurance included; upgrade requires approval |
Lodging
| Region | Maximum Per Night | High-Cost Cities (Exception) |
|---|---|---|
| US (Standard) | $[250]/night | New York City: $[350]/night San Francisco: $[350]/night Los Angeles: $[300]/night Chicago: $[280]/night |
| Canada (Standard) | CA$[275]/night | |
| Canada (High-Cost) | CA$[350]/night | Toronto: CA$[380]/night Vancouver: CA$[380]/night Montreal: CA$[300]/night |
Meals & Meal Per Diem
Meal expenses follow GSA (US) and NJC (Canada) per diem rates based on destination city. Employees may claim actual expenses up to the per diem limit or use the per diem rate without receipts.
- US Per Diem: Reference GSA per diem rates by city (available at gsa.gov)
- Canada Per Diem: Reference National Joint Council (NJC) rates by city (available at njc-cnm.gc.ca)
- Meal Type: Breakfast, lunch, dinner, and incidental expenses
- Solo Meals: Deductible if part of a business trip (IRS entertainment deduction rules apply)
Entertainment & Client Meals
- Single client/prospect meal: Max $[150] per person without approval
- Group entertainment event: Max $[500] total without approval
- Alcohol included: Yes, within reason (wine/beer/cocktails acceptable)
- Exceptions: Prior approval required from manager for amounts exceeding $[500] total
- Documentation requirement: Must list attendees, purpose, and business rationale
Office Supplies & Equipment
- Supplies (pens, paper, etc.): Max $[100] without approval
- Office furniture: Requires manager approval
- Reimbursement: Receipts required for all items over $[25]
Technology & Software
- Software subscriptions: Max $[500] per year; IT approval required
- Hardware (laptop, monitor, peripherals): Requires IT and Finance approval
- Cloud storage/SaaS tools: Director approval required for renewals over $[500]
Mileage Reimbursement
United States: IRS standard mileage rate of $[0.67]/mile for 2026 (business miles only)
Canada: CRA rates—CA$[0.72]/km for first 5,000 km; CA$[0.66]/km for each km after (business use only)
Tracking Requirement: Maintain a mileage log showing date, destination, business purpose, and miles/km traveled. Spot audits will verify logs.
Conference, Training & Professional Development
- Annual cap per employee: $[2,500]
- Registration fees: Included in cap
- Travel + lodging for conference: Included in cap
- Approval: Manager approval required; Director approval for expenses over $[1,500]
- Pre-approval: Must be obtained 30 days before event
3. Approval Workflow
Expense approvals follow a tiered structure based on dollar amount. All approvals must be completed before reimbursement is processed.
| Approval Tier | Amount Range | Required Approver | Timeframe |
|---|---|---|---|
| Tier 1 | Under $[100] | Auto-approved (submitted by employee) | Immediate |
| Tier 2 | $[100]-$[500] | Direct Manager | Within 3 business days |
| Tier 3 | $[500]-$[2,500] | Director / Department Head | Within 5 business days |
| Tier 4 | Over $[2,500] | VP / CFO | Within 5 business days |
Emergency Expense Process
- Employees may incur emergency expenses without pre-approval
- Approval is waived until reimbursement is processed
- Employee must report emergency expense to manager within 48 hours
- Expense is subject to standard approval workflow (by amount) after reporting
- Repeated emergency claims will trigger a review with Finance
Denial & Appeals
- If an expense is denied, the approver must provide written reason within 3 business days
- Employees may appeal a denial to the next level up (manager → director, director → CFO)
- Final appeals are decided by CFO within 5 business days
4. Receipt & Documentation Requirements
Receipt Thresholds
- Under $[25]: Receipt optional; verbal approval sufficient
- $[25]-$[75]: Receipt required; digital photo/scan accepted
- Over $[75]: Receipt mandatory; no exceptions
Required Receipt Information
All receipts must include the following to be valid:
- Vendor name and location (city/state or province)
- Date of transaction
- Amount (in USD or CAD, clearly indicated)
- Itemized description of goods/services purchased
- Payment method (cash, card, check)
Acceptable Receipt Formats
- Original paper receipt
- Digital/scanned receipt (clear photo, legible)
- Email confirmation from vendor (e.g., hotel confirmation)
- Credit card statement with vendor name and amount (for recurring expenses)
- Airfare/rail tickets (e-ticket acceptable)
Missing Receipt Policy
If a receipt is lost or unavailable:
- Expenses $[25]-$[75]: Sworn declaration signed by employee and manager (template provided by Finance)
- Expenses over $[75]: No reimbursement without receipt—no exceptions
- Fraud Prevention: Repeated missing receipts (3+ per year) triggers Finance investigation
Additional Documentation
Certain expense categories require additional documentation:
| Expense Type | Additional Documentation Required |
|---|---|
| Entertainment/Client Meal | List of attendees, business purpose, client/prospect name |
| Travel (Multi-day) | Trip summary with dates, destination, business purpose, client/project name |
| Mileage | Mileage log with date, starting/ending location, business purpose, miles |
| Conference/Training | Event registration, agenda, business justification for professional development |
| Home Office Equipment | Manager approval, business justification, depreciation schedule |
Digital Storage: All receipts must be submitted digitally (photo/scan) through [COMPANY EXPENSE SYSTEM]. Original receipts are retained by employee for 7 years for audit purposes.
5. Canadian Tax Compliance (GST/HST/PST/QST)
GST/HST/PST/QST Overview
Canada has a complex sales tax system with rates varying by province. The company must track Input Tax Credits (ITCs) to maximize deductions. All expense submissions must clearly indicate the province where the expense occurred.
Sales Tax Rates by Province (2026)
| Province / Territory | GST | PST/HST/QST | Total Rate |
|---|---|---|---|
| Ontario (ON) | 5% | HST 8% | 13% |
| Nova Scotia (NS) | 5% | HST 10% | 15% |
| New Brunswick (NB) | 5% | HST 10% | 15% |
| Newfoundland & Labrador (NL) | 5% | HST 10% | 15% |
| Prince Edward Island (PEI) | 5% | HST 10% | 15% |
| British Columbia (BC) | 5% | PST 7% | 12% |
| Saskatchewan (SK) | 5% | PST 6% | 11% |
| Manitoba (MB) | 5% | PST 7% | 12% |
| Alberta (AB) | 5% | None | 5% |
| Quebec (QC) | 5% | QST 9.975% | 14.975% |
Input Tax Credit (ITC) Eligibility
ITC-Eligible Expenses: The following expense categories qualify for ITCs and must be tracked separately:
- Business meals and entertainment (50% deductible for CRA purposes)
- Travel and lodging
- Office supplies and equipment
- Technology and software (capital vs. operating)
- Professional fees and consulting
ITC-Ineligible Expenses: The following do NOT qualify for ITCs:
- Personal expenses (home utility bills, personal vehicle insurance)
- Alcohol for personal consumption
- Political contributions
- Dues to social clubs or organizations
- Vehicle expenses (personal use)
CRA Documentation Requirements
- All receipts must show GST/HST/PST/QST separately
- Supplier's GST/HST registration number should be noted (if available)
- For ITCs over $[500], Finance must retain original or certified copy of receipt
- Expense reports must segregate ITC-eligible from ITC-ineligible expenses
- CRA audit period is typically 4 years; retain all documentation accordingly
Finance Responsibility: [COMPANY NAME]'s Finance team will coordinate with CRA on ITC filings and HST/GST remittance schedules. Employees must clearly label the province on all Canadian expense submissions.
6. US Tax Compliance
Accountable Plan Requirements (IRS)
To qualify as tax-free reimbursement under IRS rules, this expense policy must meet three requirements:
- Business Connection: Expense must have a business purpose and be necessary for company business
- Substantiation: Employee must provide receipts and documentation as outlined in Section 4
- Timely Return of Excess: Any reimbursement over the allowable amount must be returned to the company within a reasonable time
This policy is designed to comply with all three requirements, ensuring that employee reimbursements are not treated as taxable income.
Per Diem vs. Actual Expense Method
Per Diem Method (Preferred):
- Employee uses GSA per diem rates for destination city (no receipts required for meals)
- Simplifies record-keeping and reduces audit risk
- Employees traveling 3+ consecutive days should use per diem method
Actual Expense Method:
- Employee submits actual meal and lodging receipts
- Requires complete documentation and itemized receipts
- Useful for expenses significantly below GSA rates
Entertainment Deduction Rules (Post-TCJA)
Following the Tax Cuts and Jobs Act (TCJA) of 2017, entertainment expense rules changed:
- Deductible: Business meals (50% deductible) where the employee is present and discusses business
- Not Deductible: Entertainment (tickets, sports events, theater) — no longer deductible starting in 2018
- Exception: Meals as part of conference or event attendance remain 50% deductible
- Documentation: Must document who attended, business purpose, date, and amount
Home Office Expense Rules
If an employee works from home (W-2 employee), home office supplies and equipment are generally not deductible by the company. Exceptions:
- Ergonomic equipment (chair, desk, monitor) if medically necessary and pre-approved
- Internet/utilities cannot be reimbursed (personal expense)
- Contractor/1099 home office expenses may be deductible by the independent contractor (not the company)
Documentation for IRS Compliance
- Retain all receipts for 5+ years (IRS standard audit period)
- Mileage logs with date, destination, purpose, and miles driven
- Entertainment/meal expenses with attendee names, business purpose, and amount
- Travel itinerary with dates and business purpose
7. Prohibited Expenses
The following expenses are NOT reimbursable under any circumstances:
| Prohibited Category | Examples | Reason |
|---|---|---|
| Personal Expenses | Groceries, gas, personal care, clothing | Not business-related |
| Alcohol (Personal) | Alcohol for personal consumption, mini-bar charges | Personal; entertainment alcohol requires approval (see Section 2) |
| First/Business Class | Business class airfare or luxury seating | Upgrade to first/business class without VP approval is prohibited |
| Spouse/Partner Travel | Spouse airfare, spouse hotel room | Not business-related; tax liability for employee |
| Traffic & Parking Violations | Speeding tickets, parking tickets, towing | Personal liability; employee responsibility |
| Political Contributions | Campaign donations, political gifts | Non-deductible; potential legal issues |
| Non-Business Gifts | Personal gifts over $[25] to employees or clients | Only business gifts under $[25] allowed; limit tax deduction |
| Childcare & Dependent Care | Daycare, babysitter, nanny services | Personal family expense |
| Fitness & Wellness | Gym membership, personal trainer, spa | Personal wellness (company gym exceptions approved by HR) |
| Commute Expenses | Daily commute parking, transit, car payments | Personal commute (business travel is deductible) |
8. Submission & Reimbursement Timeline
Submission Deadline
- Standard: Submit expense report within 30 days of expense date
- Extended: Expenses submitted 30-60 days after incurrence are still eligible but may face slower processing
- Denied: Expenses submitted more than 60 days after incurrence are automatically denied unless pre-approved by CFO
Reimbursement Processing Timeline
| Stage | Timeframe | Notes |
|---|---|---|
| 1. Employee submits expense | Within 30 days of expense | All receipts and documentation required |
| 2. Manager approval | Within 3 business days | For Tier 2 expenses ($100-$500) |
| 3. Director/Finance review | Within 5 business days | For Tier 3+ expenses or compliance check |
| 4. Finance processes | Within 2 business days of approval | Enters into payroll or direct deposit |
| 5. Direct deposit | Next scheduled payroll cycle | Typically 5-10 business days after processing |
Currency & Reimbursement Method
- US Employees: Reimbursement in USD via direct deposit
- Canadian Employees: Reimbursement in CAD via direct deposit
- Foreign Expenses: Converted at the IRS/CRA exchange rate on the date of expense
- Currency Exchange: Finance will reimburse at official exchange rate; personal exchange gains/losses are employee responsibility
Faster Reimbursement Options
In certain situations, expedited reimbursement may be available:
- Emergency business expenses: expedited within 48 hours of approval
- Travel advance: Employee may request advance for pre-approved travel (requires 10 business days notice)
- Corporate card: [COMPANY NAME] offers corporate cards for eligible employees (separate policy applies)
9. Policy Violations & Consequences
Violation Classification
Violations of this expense policy are classified by severity and frequency:
Minor Violations
- Missing receipt for expense under $[100]
- Incomplete documentation (missing business purpose)
- Late submission (1-5 days after deadline)
- Incorrect category or miscoding
Serious Violations
- Submission of prohibited expense
- Receipt alteration or forgery
- Expense over limit without approval
- Late submission (more than 60 days)
- Missing receipt for expense over $[100]
Fraudulent Violations
- Intentional falsification of receipts
- Submitting personal expenses as business expenses
- Creating fake receipts
- Submitting duplicate reimbursement requests
- Misrepresenting business purpose
Progressive Discipline Process
| Offense # | Action | Consequences | Timeframe |
|---|---|---|---|
| First Offense | Minor or Serious Violation | Expense rejected; verbal coaching from manager; policy review required | Immediate |
| Second Offense | Minor or Serious Violation (within 12 months) | Expense rejected; written warning; expense privileges may be restricted (e.g., higher approval thresholds) | Within 48 hours |
| Third Offense | Any violation (within 12 months) | Suspension of expense reimbursement privileges for 60 days; disciplinary action; possible termination | Within 5 business days |
| Fraud | Fraudulent Violation | Immediate suspension of privileges; termination of employment; potential legal action and criminal referral | Immediate |
Investigation Procedure
If a violation is suspected:
- Finance or HR will conduct initial investigation (within 5 business days)
- Employee will be notified in writing of alleged violation
- Employee has 5 business days to respond with explanation
- Management will issue written decision (within 10 business days total)
- Employee may appeal to CFO within 5 business days of decision
Fraud & Legal Action
Fraudulent expense submissions are grounds for immediate termination. The company reserves the right to:
- Pursue legal action for recovery of fraudulent payments
- Refer cases to law enforcement for criminal prosecution
- Report to industry databases and professional bodies
Good Faith Errors: Honest mistakes in expense submission are treated as learning opportunities, not violations. Repeated patterns of error may still result in warnings. Employees are encouraged to ask Finance for clarification before submitting questionable expenses.