What is the Expense Reimbursement policy in Canada?

Modified on: Thu, 22 Jan, 2026 at 5:27 PM

This article outlines the rules for reimbursing business travel and vehicle expenses in Canada for the 2025 calendar year, including CRA mileage rates, taxable vs. non‑taxable reimbursements, documentation requirements, and reimbursement timelines.

1. Mileage Reimbursement (2025 CRA Reasonable Rates)

When employees use their personal vehicle for work‑related travel, employers may reimburse mileage at or below the Canada Revenue Agency (CRA) reasonable rates. Reimbursements within these limits, and for eligible business travel, are generally non‑taxable.

Standard CRA Rates for 2025

First 5,000 km: CAD 0.72 per km
Each additional km: CAD 0.66 per km

Northern Territories (Yukon, Northwest Territories, Nunavut)

First 5,000 km: CAD 0.76 per km
Each additional km: CAD 0.70 per km

Employers may reimburse at these rates or lower. Reimbursements above these “reasonable rates” become taxable income.

2. When Mileage Reimbursement Becomes Taxable

A vehicle allowance or mileage reimbursement becomes taxable when:

The employer pays more than the CRA reasonable rate.
The payment is a flat or lump‑sum allowance not tied to actual kilometres driven.
The reimbursed travel is commuting between home and the regular workplace (home ↔ office), which is not considered business travel.
Required documentation is missing or insufficient.

Taxable reimbursements must be included on the employee’s T4 slip and are subject to applicable payroll deductions (income tax, CPP, EI).

3. Documentation Required for Non‑Taxable Mileage Claims

To keep vehicle reimbursements non‑taxable, the employee must show that the travel:

Was required for employment duties
Was reasonable
Is supported by proper documentation

Mileage Logbook Requirements

Employees must maintain a mileage log capturing:

Date of each trip
Origin and destination
Purpose of trip (business rationale)
Odometer reading before and after trip
Total business kilometres driven

Additional receipts may be required for:

Tolls
Parking
Fuel (if reimbursed separately)

4. Other Travel Expenses

Employees may also be reimbursed for reasonable business‑related travel costs, including:

Airfare
Train, bus, taxi, or rideshare fares
Rental vehicles
Public transportation
Hotels and lodging
Meals during business trips

These reimbursements are generally non‑taxable when:

The expense is directly related to work.
The cost is reasonable.
Receipts and supporting documentation are provided.

Allowances (vs. Reimbursements)

If employees receive a per‑diem or other travel allowance, the allowance must be reasonable and aligned with expected costs.

Any excess amount may be treated as a taxable benefit.

5. Expense Submission & Reimbursement Timeline

To ensure timely processing, all expenses must be:

Submission Deadline

Submit by: The 15th of each month
If the 15th falls on a weekend or public holiday, submit by the last business day before the 15th.

Reimbursement Schedule

On‑Time Submission (by the 15th): Reimbursement will be paid on the last payday of the same month.
Late Submission (after the 15th): Reimbursement will be paid on the last payday of the following month.

6. Receipt Requirements

To be eligible for reimbursement:

The expense must be incurred for work‑related purposes.
Employees must provide original, itemized receipts.
- Electronic receipts are acceptable if all details—including GST/HST—are visible.
Expenses must be reasonable; excessive or non‑essential costs may be denied.

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