Process: 9/2013-T

Date: June 28, 2013

Tax Type: IRS

Source: Original CAAD Decision

Summary

This arbitral decision addresses the IRS taxation of expense allowances paid to an employee under an international secondment agreement. The applicant, a Portuguese tax resident, was seconded from his Portuguese employer to work at a related entity in New York for approximately nine months in 2008. During this period, he received €13,260.76 in allowances from the US host company, comprising housing costs (€9,862.04) and daily expense allowances (€3,398.72). The taxpayer mistakenly declared these amounts in his IRS return and subsequently sought partial annulment of the resulting tax assessment through CAAD arbitration. The core legal issue centers on whether such allowances qualify for IRS exemption under Article 2(3)(d) and Article 14 of the Portuguese IRS Code, which exclude genuine expense allowances from taxation when paid within statutory limits. The applicant argued that the amounts constituted legitimate expense allowances compensating for actual costs incurred during secondment, not remuneration, and that daily amounts remained within the €144.71 limit established for senior civil servants in 2008. He contended only €815.70 exceeded this threshold and should be taxable, while €12,445.08 should be exempt. The Tax Authority challenged this position, emphasizing that the allowances were paid by a foreign entity with which the employee had no direct employment relationship, questioning whether the statutory exemption requirements were met when the paying entity differs from the formal employer. This case highlights critical questions about cross-border secondment arrangements, the qualification of payments as expense allowances versus remuneration, and the application of exemption thresholds when international corporate networks involve multiple related but legally distinct entities.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. A..., (hereinafter designated Applicant), taxpayer no. …, with tax residence at Rua …, …, requested, on 10 January 2013, the establishment of an arbitral tribunal, in accordance with the provisions of paragraph (a) of paragraph 1 of Article 2 and paragraph (a) of paragraph 1 of Article 10 of Decree-Law no. 10/2011, of 20 January (hereinafter, Legal Regime for Tax Arbitration or RJAT), with a view to:

(i) The partial annulment of the Personal Income Tax (IRS) assessment no. 2009 ..., relating to the year 2008, in the part concerning the amount of € 12,445.08 earned by the present Applicant as expense allowances; and

(ii) Consequent refund of the Personal Income Tax resulting from the partial annulment.

  1. On 20 January 2010, the Applicant submitted an administrative review of the said assessment.

  2. The denial of the administrative review was notified to the Applicant on 15 October 2012.

  3. The request for establishment of the arbitral tribunal was accepted and notified to the Tax Authority (hereinafter Respondent).

  4. In the request, the Applicant opted not to appoint an arbitrator.

  5. Pursuant to paragraph 1 of Article 6 of the RJAT, the Ethics Council of the Arbitration Centre appointed the undersigned as arbitrator, notifying the parties.

  6. The tribunal is duly constituted to hear and decide upon the subject matter of the proceedings.

  7. The arguments supporting the Applicant's request for arbitral pronouncement are, in summary, as follows:

Arguments of the Applicant

8.1 The Applicant entered into an employment contract in January 2004 with the company B... – Assessoria de Gestão, Lda, and, through assignment of the contractual position, joined B.... & Associados, SROC, Lda, as from 1 October 2004.

8.2 On 6 October 2008, the Applicant was seconded to provide his professional services at the office of B..., LLP, in New York, USA, for a period of approximately 9 months.

8.3 B..., LLP, although distinct and independent, forms part of a worldwide network within which the execution of these "secondment agreements" is frequent.

8.4 These secondment agreements contain a set of common rules applicable to the present case:

(i) The employee's salary is maintained in accordance with the terms established in the employment contract and is paid by the company with which the employee entered into the employment contract;

(ii) During the period of secondment, all terms and conditions of the employment contract remain unchanged, with the exception of the provision of work which is performed under the direction of the company;

(iii) The payment of expense allowances intended to cover costs for meals, laundry, telephone calls, car parking, banking expenses and transport from residence/place of work/residence, due to the necessary relocation of domicile, is made by the company to which the employee is seconded.

8.5 During the period of secondment, the employment contract entered into between the employee and the company remained in effect and unchanged.

8.6 In accordance with the secondment agreement, in 2008, B..., LLP paid the Applicant expense allowances in the total amount of € 13,260.76 (USD 18,455.00), as follows: (i) accommodation - € 9,862.04 (USD 13,725.00) corresponding to the payment of housing costs; and (ii) expense allowances stricto sensu - € 3,398.72 (daily amount of USD 55.00).

8.7 By oversight, the Applicant included in Annex J of the Personal Income Tax Return form 3 the amount of € 13,260.76 paid as expense allowances, a value which he considers is not subject to Personal Income Tax in accordance with Article 2, paragraph 3, paragraph (d) and paragraph 14 of the Personal Income Tax Code and Ordinance no. 30-A/2008, of 10 January (in effect at the date of the facts).

8.8 "In the present case, both the amount correctly qualified by the parties as 'expense allowance' and here indiscriminately termed as 'expense allowance' strictu sensu or as 'expense allowance in the strict sense', as well as the amount earned as compensation for housing in New York, should be qualified as an expense allowance in accordance with the Personal Income Tax Code".

8.9 Articles 2, paragraph 3, paragraph (d) and paragraph 14 of the Personal Income Tax Code establish the prerequisites for non-taxation of expense allowances: (i) the amounts being effectively earned as expense allowances, through the performance of actual secondment by the employee in the service and interest of the employer entity and (ii) the payment of daily amounts not exceeding the limits fixed annually for State employees.

8.10 In the same sense, Article 260, paragraph 1 of the Labor Code, in effect at the date of the facts, provides: "Amounts received as expense allowances, travel allowances, transport expenses, installation allowances and other equivalent amounts are not considered remuneration, due to the employee for secondments, new installations or expenses incurred in service of the employer, except where, such secondments or expenses being frequent, these amounts, to the extent that they exceed the respective normal amounts, have been provided for in the contract or should be considered by custom as an integral element of the employee's remuneration".

8.11 Consistently, case law has also held that expense allowances do not form part of the concept of remuneration, insofar as they represent compensation for expenses incurred by the employee due to being seconded in service of the employer entity (See Judgment of the North Central Administrative Court, Case 00272/06, and Judgments of the Supreme Administrative Court (STA), handed down in the context of Cases 01042/07, 01043/07 and 01065/07).

8.12 In light of the foregoing, in the present case, the amounts earned by the Applicant upon and because of his secondment to provide his services in New York constitute, effectively, expense allowances and do not form part of the concept of remuneration.

8.13 Accordingly, during the period between 6 October and 31 December 2008, the present Applicant received the amount of € 13,260.76 as expense allowances.

8.14 Pursuant to Ordinance no. 30-A/2008, of 10 January, the limit for daily expense allowances for the year 2008 was € 144.71 for civil servants, State agents and equivalent entities with salaries exceeding the level of index 405 (€ 1,351.12, in accordance with the salary table for 2008).

8.15 The amount paid daily to the Applicant as expense allowance was USD 55, an amount which, on 31 December 2008, corresponded to approximately € 39.52, plus the amount of USD 13,275.00 (€ 9,862.04) as a housing charge, which corresponds to the daily amount of USD 159.59 (€ 114.67).

8.16 In other words, the daily amount of € 9.45 (€ 159.19 - € 144.71) is subject to taxation, in the total amount of € 815.70 and the daily amount of € 144.71, in the total amount of € 12,445.08, is excluded from taxation.

8.16 In conclusion, the Tax Authority, in taxing the amounts in question, incurred a violation of law.

  1. In turn, the Respondent Tax Authority presented a response, in which it defended itself in the following terms:

Response of the Respondent

9.1 In its response, the Respondent alleges that, given that the income was declared by the taxpayer himself, the present Applicant never exhibited any document demonstrating the basis for which the sums were paid.

9.2 Moreover, the method of payment of housing expenses is not clear.

9.3 Nevertheless, in the arguments presented – case law and legislation – it is presumed that the expense allowances were paid by the employer entity, which was not the case.

9.4 In fact, the expense allowances were paid by a company with which the employee has no direct (or even indirect) relationship of dependence or subordination.

9.5 It is, therefore, essential to understand who the paying entity is and the beneficiary of the amounts and to establish the underlying legal relationship.

9.6 Furthermore, the Applicant states that the income from United States sources was taxed in the United States but does not provide proof of this allegation, namely whether he invoked the convention to avoid double taxation entered into with the USA.

9.7 In sum, the Applicant has not proven that the sums declared by him in annex J of the Personal Income Tax Return form should not be subject to taxation in respect of Personal Income Tax.

  1. The Applicant, based on the principles of contradiction and equality of the parties, submitted, on 3 May 2013, the statement of earnings issued by B... LLP, on 22 January 2010, in which the amounts earned are broken down:

"Housing: 13,725 USD

Per diem: 4,730 USD"

10.1 He further clarified that, in accordance with the secondment agreement, the company C... was responsible for providing the present Applicant with furnished housing during the secondment. These costs were directly charged to B... LLP. In other words, the Applicant did not directly receive any sum for housing expenses.

  1. On 16 May 2013, the hearing provided for in Article 18 of the RJAT was held.

11.1 The parties waived the submission of oral arguments, provided for in paragraph 2 of Article 18 of the RJAT. They were granted a deadline until 31-05-2013 to submit written arguments.

  1. In the written arguments, the Applicant reiterates what was petitioned in the initial request and clarifies that he was not taxed in the United States on income from United States sources (a fact which is evidenced by the fact that no tax credit was requested in his 2008 Personal Income Tax Return) since the amounts paid by B... USA have a compensatory nature and not a remuneration nature.

12.1 He further adds that, in accordance with case law of the STA (Case 01043/07), it is upon the Tax Authority that the burden of proof falls that the sums paid were not intended to "cover increases in expenses incurred by him as a result of relocation of his habitual residence", which has not occurred.

12.2 Accordingly, it will necessarily have to be decided in favor of the compensatory nature and, accordingly, the Personal Income Tax assessment should be partially annulled in the part that falls upon the amounts earned by the Applicant as expense allowances excluded from taxation.

12.3 He concludes by requesting the payment of indemnity interest on the amount improperly assessed.

Nothing further having been argued or requested by the parties, it is now necessary to render a decision.

II. GROUNDS

MATTER OF FACT

Facts found proven:

  1. The Applicant entered into an employment contract in January 2004 with the company B... – Assessoria de Gestão, Lda, and, through assignment of the contractual position, joined B.... & Associados, SROC, Lda, as from 1 October 2004.

  2. On 6 October 2008, the Applicant was seconded to provide his professional services at the office of B..., LLP, in New York, USA, until 6 July 2009.

  3. A..., LLP is, in legal terms, distinct and independent from B.... & Associados, SROC, Lda.

  4. In the secondment agreement, the following was established:

(i) The employee's salary is maintained in accordance with the terms established in the employment contract and is paid by the company with which the employee entered into the employment contract;

(ii) During the period of secondment, all terms and conditions of the employment contract remain unchanged, with the exception of the provision of work which is performed under the direction of the company;

(iii) The payment of expense allowances intended to cover costs for meals, laundry, telephone calls, car parking, banking expenses and transport from residence/place of work/residence, due to the necessary relocation of domicile, is made by the company to which the employee is seconded.

  1. In 2008, A..., LLP paid, directly and indirectly, the following amounts: (i) accommodation - € 9,862.04 (USD 13,725.00) corresponding to the payment of housing costs; and (ii) daily expense allowances - € 3,398.72 (4,730 USD).

  2. The Applicant remained in Portugal, in the year 2008, for a period exceeding 268 days.

  3. The Applicant included in Annex J of the Personal Income Tax Return form 3 the amount of € 13,260.76 as self-employment income.

  4. This declaration resulted in the issuance of Personal Income Tax assessment no. 2009 ..., in the amount of € 4,151.84 to be paid.

  5. Not accepting it, the Applicant submitted an administrative review on 20 January 2010, requesting the partial annulment of the assessment in the part concerning the amount of € 12,445.08.

  6. Notified of the denial of the administrative review on 15 October 2012, the Applicant submitted the present request for arbitral pronouncement.

The decision on the matter of facts proven was based on the documents submitted and on the absence of objection by the Tax Authority regarding the facts invoked by the Respondent.

There are no unproven facts relevant to the decision of the case.

Issues to be examined

A) On the merits: should the partial illegality be declared and consequently the partial annulment of the Personal Income Tax assessment no. 2009 ..., relating to the year 2008, in the part concerning the amount of € 12,445.08 earned by the present Applicant as expense allowances, be ordered?

ON THE MERITS

a) On the legal relationship established with the paying entity

To properly characterize the facts for Personal Income Tax purposes, we must, in the first place, determine what legal relationship was established between the Applicant and the entity paying the income.

The Applicant was, at the time, an employee of the company B.... & Associados, SROC, Lda. In this capacity and maintaining his employment relationship, the Applicant provided services, for a period of approximately 9 months, to a third party, in accordance with the agreement established between all parties involved. After this period, the Applicant returned to his place of origin, with safeguarding of all his rights.

We are, therefore, faced with an occasional assignment of an employee, as provided for in Article 322 of the Labor Code (Law 99/2003, of 27 August, in effect at the time). Indeed, "...for there to be an occasional assignment of employees, it is necessary for three elements to be present: first, that the employee is assigned from the employer's own staff to another entity, which exercises the power of direction over him; second, that the assignment is temporary and contingent; finally, that the employment relationship between the employee and the assigning party is maintained" (Annotation by Guilherme Gray, PEDRO ROMANO MARTINEZ and others, Annotated Labor Code, 6th Ed., 2008, p.613).

During this period, the powers proper to the employer entity are shared between the assigning entity and the assignee. This assignment "implies a division of the powers proper to the employer: the assigning employer, in principle, retains the disciplinary power over the assigned employee and the status of employer, whereas the power of direction, as it pertains to the shaping of the activity and other working conditions, lies within the legal sphere of the assignee". (Guilherme Gray, Idem, p. 614).

Now, having regard to the underlying labor regime, all income paid - directly or indirectly - to the employee constitutes principal or ancillary income resulting from work provided under an employment contract (Article 2 of the Personal Income Tax Code).

b) On the tax classification of the income paid

It is now necessary to classify, for Personal Income Tax purposes, each of the income amounts paid to the Applicant. As per point 5 of the matter of facts, B..., LLP paid, directly and indirectly, the present Applicant the following amounts: (i) accommodation - € 9,862.04 (USD 13,725.00) corresponding to the payment of housing costs; and (ii) daily expense allowances - € 3,398.72 (4,730 USD).

Pursuant to the assignment agreement, the daily expense allowances (Per diem) were intended to cover reasonable costs for meals, clothing, telephone calls, car parking, banking charges, work-related travel and other costs (p. 5 of the agreement). These amounts are not, in light of the aforementioned Article 260, paragraph 1 of the Labor Code, in effect at the date of the facts, considered remuneration.

For tax purposes, Article 2, paragraph 3, paragraph (d) of the Personal Income Tax Code provides that "Expense allowances and amounts earned through the use of one's own vehicle in service of the employer entity, to the extent that both exceed the legal limits or when the conditions for their allocation to State employees are not met, and sums for expenses for secondment, travel or representation for which accounts have not been rendered by the end of the fiscal year" are taxable. Pursuant to paragraph 14 of the aforementioned Article 2, the legal limits provided for in this article shall be those fixed annually for State employees.

It has been settled case law that, for Personal Income Tax purposes, expense allowances only constitute remuneration to the extent that they exceed the legal limits (see, by way of example, besides the case law cited by the Respondent, the Judgments of the STA, of 22/05/2013, Case 0146/13; of 12/03/2008, Case 01065/07; of 23/04/2008, Case 01044/07; of 06/03/2008, Case 01063/07).

The legal limit for State employees per secondment abroad was fixed, for 2008, at € 144.71 (Ordinance no. 30-A/2008, of 10 January).

In addition to the daily expense allowance amount, the present Applicant was also provided with the use of housing in the amount of € 9,862.04 (USD 13,725.00), corresponding to the payment made by B..., LLP to the rental company.

The vexata quaestio is whether this amount is included in the value of daily expense allowances - as the Applicant contends - or whether these amounts correspond to ancillary remuneration, as provided for in paragraph 4 of paragraph (b) of paragraph 3 of Article 2 of the Personal Income Tax Code. Let us examine this.

In the systematization of Article 2 of the Personal Income Tax Code, in addition to the general rule provided for in paragraph 1, the legislator decided to include a set of special rules throughout paragraph 3 with the objective of ensuring the effective taxation of the income described therein (In this sense, see XAVIER DE BASTOS, Real Incidence and Determination of Net Income, Coimbra Editora, 2007, p. 60 et seq).

In paragraph 3, paragraph (b) of Article 2, the legislator addressed the definition and exemplification of which "ancillary benefits" are subject to tax. In the first place, a generic definition of ancillary benefit is established: "all rights, benefits or privileges not included in principal remuneration which are earned due to the provision of work or in connection with it and constitute for the respective beneficiary an economic advantage". Subsequently, the Code enumerates ten examples of ancillary benefits which should be the object of taxation.

In this enumeration, paragraph 4 of paragraph (b) of paragraph 3 of Article 2 establishes that the following constitute an ancillary benefit "Housing allowances or equivalents or the use of housing provided by the employer entity".

Given the express provision of this tax incidence rule, whenever the employer entity provides housing, whether temporary or permanent, the classification of this income must be made in light of this provision and not under the regime of expense allowances. An interpretation to the contrary would violate the principle of legality, in its aspect of specificity (Article 103, paragraph 2 of the Constitution of the Portuguese Republic and Article 8, paragraph 1 of the General Tax Law).

In fact, the regime for expense allowances requires the application of the "conditions for their allocation to State employees" (paragraph (d) of paragraph 3 of Article 2 of the Personal Income Tax Code) provided for in Article 2 of Decree-Law no. 192/95, of 28 July, which regulates the allocation of expense allowances for secondment in public service abroad and in foreign countries, namely the provision of accommodation in a three-star hotel establishment or equivalent. This is not the case here.

Accordingly, the income relating to the use of housing is taxed in accordance with paragraph 4 of paragraph (b) of paragraph 3 of Article 2, combined with paragraph 2 of Article 24 of the Personal Income Tax Code.

Having defined the applicable tax incidence rule, it is now necessary to determine whether the amount incurred with housing should, by application of the provisions of paragraph 4 of paragraph (b) of paragraph 3 of Article 2 and paragraph (a) of paragraph 2 of Article 24, both of the Personal Income Tax Code, be subject to taxation in Personal Income Tax in the sphere of the present Applicant.

Our answer is in the negative.

Having regard to the facts found proven, this income constituted, in the sphere of the Applicant, a "necessary expense" (XAVIER DE BASTOS, Idem, p. 84) resulting from the temporary secondment away from his habitual residence and not an "economic advantage" as is expressly required by paragraph (b) of paragraph 3 of Article 2 of the Personal Income Tax Code for the income to be taxable. We do not perceive, in the present case, any effective economic advantage to the employee or increase in personal income resulting from the provision by the employer entity of housing.

In this sense RUI DUARTE MORAIS states: "The provision or payment by another party (which, contrary to what the law says, does not necessarily have to be an employer entity) of the employee's residence is at issue. However, this does not imply, in all cases, the existence of an ancillary benefit. This occurs, for example, (...) with the accommodation of temporarily seconded employees, even if in housing, etc."(RUI DUARTE MORAIS, On Personal Income Tax, 2nd Ed., 2008, pp.61-62)

We further add that an interpretation to the contrary would violate the principle of taxpaying capacity, the foundation and limit of all taxation (MANUEL FAUSTINO, "The allocation, by the employer entity, of housing as an ancillary benefit taxable in Personal Income Tax", in Journal of Official Accounts Technicians, no. 62, Year V, May 2005).

In conclusion,

(i) The daily expense allowances in the total amount of € 3,398.72 are excluded from taxation as they do not exceed the legal daily limit of € 144.71 (paragraph (d) of paragraph 3 of Article 2 of the Personal Income Tax Code);

(ii) The amount of € 9,862.04 relating to expenses incurred with the rent of housing provided to the present Applicant is excluded from taxation as it does not constitute ancillary income, in accordance with paragraph (b) of paragraph 3 of Article 2 of the Personal Income Tax Code.

III. DECISION:

The matter of facts is as transcribed above.

The tribunal is competent and the parties are legally standing.

In light of the foregoing:

  • The request for a declaration of partial illegality and consequent partial annulment of the Personal Income Tax assessment no. 2009 ..., relating to the year 2008, in the part concerning the amount of € 12,445.08 declared in annex J of the Personal Income Tax Return form 3, is adjudged to be well-founded;

  • The Tax Authority is condemned to refund the tax collected in the part corresponding to the correction provided for in the preceding paragraph;

  • The request for payment of indemnity interest submitted by the Applicant in the written arguments is denied as it is not admissible to expand the request after the hearing provided for in paragraph 1 of Article 18 of the RJAT.

The value of € 12,445.08 (the value indicated and not contested) is fixed to the proceedings, and the corresponding arbitration fee is fixed at € 918.00, in accordance with Table I of the Regulations of Costs of Tax Arbitration Proceedings.

Costs to be borne by the respondent entity.

Notify.

Lisbon, 28 June 2013

(Amândio Silva)

Frequently Asked Questions

Automatically Created

Are per diem allowances (ajudas de custo) paid under international secondment agreements subject to IRS taxation in Portugal?
Per diem allowances paid under international secondment agreements may be exempt from IRS taxation in Portugal if they meet specific legal requirements. Under Article 2(3)(d) and Article 14 of the IRS Code, expense allowances are excluded from taxable income when they genuinely compensate for actual expenses incurred by the employee during secondment in service of the employer, and when daily amounts do not exceed the limits established annually for civil servants. For 2008, the applicable limit was €144.71 per day for senior-level employees. However, a critical issue arises when allowances are paid by a host entity abroad rather than the direct Portuguese employer, as the Tax Authority may question whether the legal requirements for exemption are satisfied when there is no direct employment relationship with the paying entity.
What is the tax treatment of daily allowances for employees temporarily assigned abroad under a secondment agreement?
The tax treatment of daily allowances for employees temporarily assigned abroad under secondment agreements depends on their qualification as genuine expense allowances rather than remuneration. Portuguese law (Article 260 of the Labor Code and IRS Code provisions) establishes that amounts received to compensate for actual expenses incurred during secondment—such as meals, accommodation, transport, and relocation costs—are not considered remuneration and may be exempt from IRS. The exemption applies when: (1) the employee is genuinely seconded to perform services in the interest of the employer; (2) the amounts compensate for real expenses; and (3) daily payments remain within statutory limits (€144.71/day for 2008 for higher salary levels). Amounts exceeding these limits are subject to IRS taxation as employment income. Documentation proving the nature and purpose of payments is essential to support exemption claims.
Can a taxpayer request partial annulment of an IRS assessment related to per diem allowances through tax arbitration at CAAD?
Yes, a taxpayer can request partial annulment of an IRS assessment related to per diem allowances through tax arbitration at the Centro de Arbitragem Administrativa (CAAD). This case demonstrates the procedure: after the Tax Authority denied an administrative review of the IRS assessment, the applicant filed an arbitration request under Decree-Law 10/2011 (the Legal Regime for Tax Arbitration). The request sought partial annulment of the assessment in the amount incorrectly taxed as income rather than exempt expense allowances, plus a refund of overpaid tax. Tax arbitration provides an alternative dispute resolution mechanism allowing taxpayers to challenge tax assessments before an independent arbitral tribunal without pursuing lengthy court proceedings. The arbitrator examines whether the Tax Authority correctly applied tax law to the disputed allowances.
What are the conditions for per diem allowances to be exempt from IRS under Portuguese tax law?
For per diem allowances to be exempt from IRS under Portuguese tax law, several cumulative conditions must be met: (1) The amounts must be genuinely paid as expense allowances (ajudas de custo) to compensate for actual expenses incurred by the employee; (2) The employee must be seconded or displaced from their normal workplace to perform services in the interest and at the direction of the employer entity; (3) The payments must compensate for real costs such as meals, accommodation, local transport, and other necessary expenses resulting from the temporary relocation; (4) The daily amounts paid cannot exceed the limits established annually by ordinance for civil servants at equivalent salary levels—for 2008, this was €144.71/day for senior positions; and (5) The allowances must not constitute disguised remuneration or regular salary supplements. Any amounts exceeding these limits are treated as taxable employment income subject to IRS.
How does the CAAD arbitral tribunal assess the taxability of allowances covering meals, transport, and living expenses during employee secondment?
The CAAD arbitral tribunal assesses the taxability of allowances covering meals, transport, and living expenses during employee secondment by examining both the formal qualification and substantive nature of the payments. The tribunal analyzes: (1) whether amounts genuinely compensate for actual expenses incurred due to temporary displacement rather than constituting remuneration; (2) whether the secondment arrangement is legitimate and serves the employer's business interests; (3) whether daily amounts remain within statutory limits (comparing actual payments to the thresholds in annual ordinances); (4) the legal relationship between the employee, the formal employer, and any paying entity—particularly relevant when payments come from a related but legally distinct foreign entity; and (5) whether proper documentation supports the expense allowance characterization. The tribunal applies Article 2(3)(d) and Article 14 of the IRS Code, relevant Labor Code provisions (Article 260), and considers established case law on distinguishing expense allowances from taxable remuneration.