FOREIGN TRAVEL

Policy Steward:  Office of the Corporate Controller

Table of Contents:

  • Purpose
  • Travel Classifications - CONUS / OCONUS, Domestic / Foreign
  • Partial Per Diem for Foreign Travel
  • Permission Required to Use Actual Expenses in Lieu of Per Diem
  • Foreign Travel Using Sponsored Funds
  • Passports and Visas
  • Taxability of International Travel with Personal Use
  • Illustrations of International Travel Combining Business and Personal Expenses
  • Value-Added Tax (VAT) Reclamation
  • Further Information

  • Purpose

    The policy sections below pertain to payment or reimbursement for costs related to foreign travel.  All employees travelling internationally must also abide by the International Travel Requirements Policy

    Travel Classifications - CONUS/OCONUS, Domestic/Foreign

    Terminology for foreign travel differentiates between domestic and foreign destinations, and reimbursement methods distinguish between CONUS (continental United States) and OCONUS (outside continental United States). These terms are used throughout sponsored funding programs, and do affect the method of reimbursement.

    Reimbursment Methods For Foreign Travel
      CONUS Rates OCONUS Rates
    Domestic travel includes these areas: 48 continental United States Alaska, Hawaii, Canada, US Territories*
    Foreign travel includes these areas: None All locations EXCEPT: Alaska, Hawaii, Canada, US Territories*
    Reimbursement method: Meals and incidentals - Per diem reimbursement
    All other expenses - Actual reimbursement
    Meals, lodging, and incidentals - Per diem reimbursement
    All other expenses - Actual reimbursement (receipts required)

    *Puerto Rico; Guam; U.S. Virgin Islands; American Samoa; Northern Mariana Islands; Midway Islands; Wake Island; Johnston Atoll; Baker, Howland, and Jarvis Islands; Kingman Reef; Navassa Island; Palmyra Atoll

    When Trip Encompasses Time in both Foreign and Domestic Locations

    University Per Diem Reimbursement for Foreign Travel

    Per diem for OCONUS travel is a flat daily rate in lieu of actual subsistence expenses that include meals, lodging, and certain incidentals (tips, local phone calls, currency conversion, and excess baggage costs). The per diem rate to be applied each day is that of the lodging location for that night. The per diem rate tables are comprised of a lodging portion and a meals and incidentals expense portion (M&IE).

    Per diem lodging for travelers staying at US military bases will be based on the DOD rates for that military installation.

    Partial Per Diem for Foreign Travel

    The need for prorating the meal per diem occurs when a traveler has some meals provided by a conference, lodging accomodations or host.

    First and last day of travel will be reimbursed at 75% of the per diem rate.  Provided meals will be deducted from this 75% rate.

    If any meals are provided by a conference or host, then the meal per diem for that trip will be adjusted to correspond with the meals that were provided. In the event that all meals for a day are provided by a conference, business group meal, or another source, no meal per diem can be claimed for that day. However, the incidental amount, which varies by location, may still be claimed at the traveler's discretion.

    Per Diem for Foreign Travel with Overnight Airline Travel

    In situations where the traveler’s first and/or last day of travel includes an overnight portion and lodging expenses are not incurred, the lodging per diem for that day is not permitted. The meal per diem for that day should be based on the departure location.

    Permission Required to Use Actual Expenses in Lieu of Per Diem

    It may be permissible for an employee to claim OCONUS expenses on an actual basis in lieu of the per diem basis. In certain cases, it may be preferable to handle lodging as per diem, and meals as actual, or vice versa. If expenses are to be claimed on an actual basis and are expected to exceed the OCONUS per diem amount, the traveler must explain in writing why the per diem basis is not suitable for lodging and/or meals and obtain written approval in advance from the Budget Executive with consultation with the Financial Officer. IRS regulations require that if the actual reimbursement method is approved, all expenses for that type of expenditure (lodging, meals or both) for the entire trip must be claimed on an actual basis and supported by receipts. If the difference between the actual cost basis and per diem is significant, any difference in cost may have to be charged to unrestricted funds, at the discretion of the Financial Officer. Note that travelers are always able to request reimbursement at the actual cost basis for foreign travel if it is less than the OCONUS per diem amount.

    Foreign Travel Using Sponsored Funds

    Foreign travel policies of federal and non-federal sponsors vary. The traveler must review the terms and conditions of his sponsored agreement and the sponsoring agency before making travel arrangements. In the event there is a conflict between a sponsored agreement policy (terms and conditions) and Penn State’s policies, the more restrictive policy applies.

    The Uniform Guidance 2 CFR 200.474 stipulates that an individual's travel can only be paid on a federally-sponsored award if the participation of the individual is necessary for the award and the costs are a direct results of the individual's travel for the federally sponsored award.  Documentation should be maintained clarifying why the particular person is traveling, why the travel is necessary and how it benefited the project.

    For foreign travel on federal programs, that require written approval from the Procuring Contracting Officer (PCO) or the Administrative Contracting Officer (ACO), travel requests should be submitted to the PCO/ACO no later than 10 business days prior to departure, and 30 days for travel to sensitive countries. The PCO/ACO will scrutinize each request to ensure that only the minimum travel, consistent with accomplishment of the official business, is authorized.

    The Fly America Act requires use of a U.S. flag air carrier when traveling on a federally supported project.

    Fly America Act

    U.S. law, 49 U.S.C. 40118, known as the Fly America Act, requires travelers whose air travel is being financed by the U.S. government to use U.S. flag air carrier service for all international air travel when available. The Federal Travel Regulations Sections 301-10.131 through 301-10.143 define U.S. flag air carrier service and provide exception criteria for the use of non-U.S. flag air carrier service.

    The traveler must use a U.S. flag air carrier on every portion of the route where service is provided unless the traveler qualifies for a waiver. Note that cost and/or personal convenience are not included in the exception criteria used to determine the non-availability of a U.S. flag air carrier.

    Air travel financed by the U.S. government, except Department of Defense (DOD) funds, may use the Open Skies Agreement as an exception to the Fly America Act.

    Travelers using a non-U.S. flag air carrier requesting reimbursement from a U.S government sponsored project must qualify for an exception under the act. The travel agent who booked the travel must complete and sign the Fly America Act Waiver Checklist at the time of booking to insure accurate documentation of the authorized exception at the time of booking. When travel is booked externally, Purchasing's Travel onLion staff cannot complete the form because they did not book the travel and have no knowledge of the booking limitations that occurred when the travel was booked.

    Travel onLion may be used when exceptions to the Fly America Act are required. Travel onLion staff will provide support and will complete the Fly America Act Waiver Checklist since they will have knowledge of the booking limitations at the time the travel was booked.

    When a non-US flag carrier is used for foreign travel which is funded in whole or in part by the US government or will be claimed as a cost on a federal award, the Fly America Act Waiver Checklist must be completed PRIOR to booking.  The checklist must then be attached as back-up for the appropriate ERS report.  If the Waiver Checklist is not completed and non-US flag carriers were used, these costs will not be permitted on federally-funded accounts.

    Code-Shared Flights

    Some flights may qualify as a U.S. flag air carrier if they are code-shared flights. The determining factor for identifying the use of a U.S. flag air carrier is the air carrier's designator code, which precedes the flight number (e.g., NW2222).

    Passports and Visas

    Travel Services and the contract travel agencies provide assistance in obtaining passports and visas. Reimbursement is permitted for actual passport and visa fees for business travel; however, the expense may not be eligible as a direct cost to a sponsored program. Since a passport can be used for multiple trips over several years, the cost is not a project-specific expense and therefore is not allowed on most sponsored projects as a direct cost. Visas are generally required in relation to a specific trip and therefore the cost is generally allowable as a direct cost for a sponsored project.

    Taxability of International Travel with Personal Use

    International travel frequently consists of both business and personal components. According to the IRS, there is a taxability issue if BOTH of the following conditions are met:

    1. The total period of the trip is longer than one week, and

    2. IRS CALCUATION RULE: For purposes of establishing whether the trip was more than seven days, do not count the day in which the person leaves the United States. However, do count the day in which the individual returns to the United States. Thus, in counting days, look at when the person leaves the United States to when he/she returns to the United States, but do not count the day in which the person leaves the United States.

    3. At least 25 percent of the trip is personal

      IRS CALCULATION RULE:  Once you have established that the foreign travel is more than seven days, the calculation of the percentage of personal time should include all days that the person is outside the United States, including travel days en route.

      Example: Individual leaves New York on Dec. 1, arrives in Japan on Dec. 2, leaves Japan on Dec. 10 and arrives in NY on Dec. 11, there are 10 days for purposes of calculating whether the trip exceeded  seven days (Dec. 2 – 11).  However, all eleven days (Dec. 1-11) are counted in determining the personal time percentage.

    In the event that both conditions are met, a portion of the common business expenses that are reimbursed to the traveler, including airfare, is taxable to the traveler. This requirement applies to travel outside the 50 United States and the District of Columbia.

    NOTE that if a trip includes non-Penn State business travel, such as personal consulting, this can be so noted for purposes of taxes, but the airfare and other travel costs incurred must be appropriately allocated to the non-business travel and the portion related to non-Penn State business will not be payable or reimbursable by Penn State. See the section on Travel Compensated by a Third Party in the Overview. 

    For the purposes of calculating the percentage of business and personal time when a travel day consists of both business and personal time, the day would be classified as a business day. For purposes of this policy, sabbaticals are treated as business. For more information, review the following examples:

    Illustrations of International Travel Combining Business and Personal Expenses

    Trip with Taxable Element

    An employee travels to London for 10 days, of which 7 days are business related and 3 days are personal; 70 percent of the trip is business and 30 percent is personal. The traveler is reimbursed for airfare and seven days of meals and lodging. The other three days of meals and lodging are considered personal and are not reimbursed. Since the trip was longer than one week and at least 25 percent personal, the employee will be taxed on 30 percent of the airfare considered personal under IRS regulations.

    Trip with No Taxable Element

    An employee travels to London for 10 days, of which 8 days are business related and 2 days are personal; 80 percent of the trip is business and 20 percent is personal. The traveler is reimbursed for airfare and eight days of meals and lodging. The other two days of meals and lodging are considered personal and are not reimbursed. The cost of airfare, even though it is reimbursed to the traveler, is not taxable to the traveler since the personal component is not equal to or greater than 25 percent of the trip.

    Value-Added Tax (VAT) Reclamation

    Value-Added Tax (VAT) is a national sales tax on goods and services, which is levied by many countries around the world. In 1987, the European Union (EU) began offering refunds of VAT to foreign companies that travel to participating EU countries for business purposes.

    Depending on the country, VAT may be refunded on hotels, restaurants, car rentals, parking, gasoline, diesel fuel, transportation within the country, business entertainment, telecommunications, conferences, trade shows, training courses, and professional fees. Certain VAT is not refundable, such as on alcohol and laundry services.

    A list of participating countries and reclamation information is available at http://vat.taxback.com/resources/vat-chart-for-us-companies.html. The employee is responsible for completing the VAT Reclamation; the submission procedure must be initiated through the Employee Reimbursement System (ERS). For detailed information, see the Value Added Tax Reclamation Submission Procedure. In the event a VAT refund is to be claimed, the employee is responsible for submitting original receipts to Accounting Operations, even if the per diem method is used for reimbursement.

    Further Information:

    For questions, additional detail, or to request changes to this policy, please contact the Office of the Corporate Controller.


    Effective Date: August 2, 2016
    Date Approved: July 27, 2016
    Date Published: August 2, 2016

    Most Recent Changes:

    Revision History (and effective dates):

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