Business travel is a common necessity in today’s globalised world, and Israel is no exception. Whether employees are travelling domestically or internationally for work, companies often provide per diem allowances and travel expense reimbursements to cover accommodation, meals, and transportation costs.
However, understanding per diem rates, travel reimbursements, and taxation regulations in Israel—particularly for Employer of Record (EOR) employees—is essential to ensure compliance and avoid unexpected tax liabilities.
In this guide, we break down the key aspects of business travel expenses in Israel, from per diem rates to tax considerations for employers.
1. What is a Per Diem Allowance?
A per diem (daily allowance) is a fixed amount provided to employees to cover daily expenses incurred during business travel. These expenses typically include:
- Meals (breakfast, lunch, dinner)
- Accommodation (if applicable)
- Transportation (if not covered separately)
- Miscellaneous work-related expenses (e.g., internet, small purchases)
Per diem payments are often preferred over reimbursement-based models because they simplify expense management and eliminate the need for employees to submit receipts for every purchase.
2. Per Diem for Domestic Business Travel (Within Israel)
Unlike some countries that set government-mandated per diem rates, Israel does not have a fixed statutory per diem for domestic business travel. Instead, companies establish their own internal policies, which typically follow industry best practices.
Typical Per Diem Rates in Israel
While per diem amounts can vary, the following are standard rates used by many Israeli companies:
- Half-day trip (4-8 hours): 100-150 ILS
- Full-day trip (8+ hours, no accommodation): 200-300 ILS
- Full-day with accommodation: 400-1500 ILS (depending on city & hotel rates)
Some businesses opt for actual expense reimbursements, requiring employees to submit receipts rather than using a fixed per diem rate. However, this can create administrative burdens and potential tax complications.
3. Per Diem for International Business Travel
For employees travelling abroad, per diem rates are often determined by either corporate policy or Israeli Tax Authority (ITA) guidelines, which recognise country-specific allowances.
Typical Per Diem Rates for International Business Travel
- Europe & North America: $120 – $150 per day
- Asia, Africa, South America: $80 – $130 per day
- High-cost cities (e.g., London, New York, Tokyo): $180 – $250 per day
Companies can also reimburse actual expenses instead of providing per diem payments, though this requires employees to retain and submit receipts for every purchase.
4. Reimbursement for Travel Expenses
Beyond per diem allowances, companies may also reimburse business-related travel costs, such as transportation and accommodation.
Transport & Mileage Reimbursement
Employees using their personal vehicles for business travel may receive mileage reimbursements, which typically range between 2.90 – 3.50 ILS per kilometre.
Other transport-related reimbursements include:
- Car rentals & taxi fares – reimbursed upon receipt submission.
- Public transport (trains, buses) – reimbursed with receipts.
- Flights – reimbursed at economy class unless company policy allows business class.
- Company cars – employees using company vehicles generally do not receive per-kilometre compensation.
5. Employer Tax Considerations – Special Case for EOR Employees
For Employer of Record (EOR) employees in Israel, business travel expenses and per diem allowances are treated as taxable benefits rather than legitimate business expenses.
Why Are Per Diem & Travel Reimbursements Taxable for EOR Employees?
Unlike direct employers, who can classify travel reimbursements as business expenses, an EOR is not the direct beneficiary of the employee’s travel. As a result, the Israeli Tax Authority (ITA) considers these payments part of the employee’s taxable salary.
Tax Implications for EOR Employers
- Any per diem or travel reimbursement provided to an EOR employee is subject to income tax, National Insurance (Bituach Leumi), and employer contributions.
- Unlike regular employers, an EOR cannot classify these payments as non-taxable business expenses, which can increase payroll tax liabilities.
6. Compliance Strategies for EOR Employers
To mitigate taxation on travel-related expenses for EOR employees in Israel, companies can adopt the following approaches:
✅ Gross-up Approach: Adjust salaries to compensate for the taxation on travel-related allowances.
✅ Clear Structuring: Factor in tax implications when defining per diem and reimbursement policies.
✅ Corporate Credit Card: Provide EOR employees with a corporate credit card to pay for travel expenses directly, reducing taxable reimbursements.
✅ CWS Israel Corporate Debit Card: Issue an EOR employee a CWS Israel corporate debit card, ensuring that expenses are directly covered rather than classified as taxable income.
7. Key Takeaways for Employers
- Domestic Per Diem: No fixed government rate; standard per diem ranges between 100-150 ILS for half-day trips and 400-1500 ILS for overnight stays.
- International Per Diem: Varies by destination, with high-cost cities like London and New York reaching $250 per day.
- EOR Employees: Travel allowances are treated as taxable benefits rather than business expenses.
- Compliance Strategies: Employers should consider alternatives like corporate credit cards or structured allowances to avoid excessive taxation.
At CWS Israel, we help global companies navigate compliance complexities when employing talent in Israel. Our Employer of Record (EOR) services ensure that your business remains compliant while optimising employee benefits and tax efficiency.
👉 Need expert guidance on per diem policies and travel reimbursements in Israel? Get in touch with us today!
