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29.7 Expense Reimbursements and Benefits

Understanding Expense Reimbursements​

Expense reimbursements are payments made to employees to cover business expenses they have incurred. These must be handled correctly to avoid incorrect social charge treatment and tax issues.

Types of Expense Reimbursements​

1. Travel Expenses​

Qualifying Expenses:

  • Transportation costs (train, plane, car)
  • Accommodation costs
  • Meals during business travel
  • Other travel-related expenses

Treatment:

  • Actual cost reimbursements: Generally not subject to social charges (with conditions)
  • Fixed allowances: Subject to social charges
  • Must be business-related and documented

2. Meal Expenses​

Types:

  • Business meal reimbursements
  • Meal vouchers (chèques-repas)
  • Company-provided meals

Treatment:

  • Meal vouchers: Up to €10.80/day exempt from social charges (as of 2025)
  • Actual cost reimbursements: May be exempt (with conditions)
  • Fixed meal allowances: Subject to social charges
  • Company meals: Taxable benefit

3. Transportation Expenses​

Types:

  • Public transportation reimbursements
  • Car mileage reimbursements
  • Parking expenses
  • Company car

Treatment:

  • Actual cost reimbursements: Generally not subject to social charges (with conditions)
  • Fixed transportation allowances: Subject to social charges
  • Company car: Taxable benefit, subject to social charges

4. Professional Development​

Types:

  • Training course fees
  • Conference expenses
  • Professional membership fees
  • Educational materials

Treatment:

  • Generally not subject to social charges if business-related
  • Must be documented
  • Must be for business purposes

Conditions for Exemption​

Actual Cost Reimbursements​

Exempt from Social Charges If:

  • Actual costs are reimbursed (not fixed allowance)
  • Expenses are business-related
  • Proper documentation is maintained
  • Reimbursement is made within reasonable time

Required Documentation:

  • Receipts or invoices
  • Expense reports
  • Business purpose explanation
  • Approval by employer

Benefits in Kind​

Taxable Benefits​

Common Taxable Benefits:

  • Company car
  • Private health insurance (employer-paid)
  • Housing provided by employer
  • Low-interest loans
  • Stock options (when exercised)

Treatment:

  • Included in gross salary
  • Subject to social charges
  • Subject to income tax

Valuation of Benefits​

Company Car:

  • Standard valuation: 1.5% of car value per month
  • Or: Actual cost method (with conditions)

Private Health Insurance:

  • Premium amount paid by employer

Housing:

  • Fair market rental value

Accounting for Reimbursements​

PCN Accounting​

Expense Reimbursement Entry:

  • Debit: Account 625 (Travel expenses) or appropriate expense account
  • Credit: Account 512 (Bank) or Account 421 (Employee advances)

Example:

  • Employee travel expense reimbursement: €500
  • Debit: Account 625 (Travel expenses) - €500.00
  • Credit: Account 512 (Bank) - €500.00

Note: If exempt from social charges, no social charge entry needed.

Luxembourg Compliance Note​

Important Requirements:

  • Documentation: Maintain proper documentation for all reimbursements
  • Business purpose: Reimbursements must be for business purposes
  • Actual costs: Prefer actual cost reimbursements over fixed allowances
  • Timing: Reimburse within reasonable time
  • Social charge treatment: Understand when reimbursements are subject to social charges

Common Issues:

  • Missing documentation: Not maintaining receipts and documentation
  • Fixed allowances: Using fixed allowances when actual costs should be reimbursed
  • Personal expenses: Reimbursing personal expenses as business expenses
  • Social charge errors: Incorrectly including/excluding from social charge base

Think It Through​

TechLux Solutions employee travels for business and incurs:

  • Train ticket: €150
  • Hotel: €200
  • Meals: €80
  • Taxi: €30

The company reimburses the actual costs. Are these reimbursements subject to social charges? How should they be accounted for?

Concepts in Practice​

Expense Reimbursement Example

Artisan Boulangerie employee expense reimbursements:

Case 1: Business Travel

  • Train ticket: €100 (actual cost, documented)
  • Hotel: €150 (actual cost, documented)
  • Meals: €60 (actual cost, documented)
  • Total: €310
  • Treatment: Not subject to social charges (actual costs, business-related, documented)

Case 2: Monthly Transportation Allowance

  • Fixed allowance: €100/month
  • Treatment: Subject to social charges (fixed allowance)

Case 3: Meal Vouchers

  • Meal vouchers: €200/month (€10/day × 20 days)
  • Treatment: Exempt from social charges (within €10.80/day limit)

Case 4: Company Car

  • Car value: €30,000
  • Taxable benefit: €30,000 × 1.5% = €450/month
  • Treatment: Subject to social charges (taxable benefit)