Meal allowances – supplementary information from the Financial Administration
On its webpages, the Financial Administration made public supplementary information to the amendment to the Income Tax Act, which as of 1st January 2021 enables employers to provide employees with a monetary allowance for meals, the so-called meal voucher flat fee, as an additional form of meal allowance under advantageous tax conditions. This is an alternative to meal vouchers (a non-monetary allowance), which are a widespread employee benefit.
The Labour Code regulates the rise of the claim. The Income Tax Act regulates the tax regime of the meal allowance provided to employees. The monetary meal allowance is considered an income from gainful employment, exempt from tax pursuant to Section 6 para. 9 letter b) Income Tax Act. The tax-exempt income is the value of meals provided as a non-monetary benefit by the employer to the employee for consumption at the workplace or in the context of meals arranged via other subjects, or a monetary contribution provided to the employee by the employer for meals for one shift pursuant to the Labour Code up to the amount of 70 % of the upper limit of the meal expenses which can be provided to employees remunerated by pay during a business trip lasting from 5 to 12 hours.
The tax-exempt income on the employee’s side is comprised of meals in the form of a non-monetary supply without a fixed maximum limit. In the case of a monetary allowance, however, this is an income exempt from tax on the employee’s side to a limit of 70 % of the upper limit of the meal allowance which can be provided to employees remunerated by pay during a business trip lasting 5 to 12 hours for one shift pursuant to the Labour Code, which represents the amount of CZK 75.60 for 2021.
The conditions for assessing the meal allowance (non-monetary or monetary) as a tax-deductible expense (cost) on the employer’s side in other regards are defined in Section 24 para. 2 letter j) point 4 Income Tax Act).
The meal allowance can be applied as an expense (cost) if the presence of the employee during this fixed shift is at least 3 hours long. The meal allowance can be applied as an expense (cost) for another meal for the employee if the length of his/her shift, in total with the mandatory work break with which the employer is obliged to provide the employee pursuant to a special legal regulation, is longer than 11 hours.
In connection with the monetary meal allowance, the General Financial Directorate answers the following questions most frequently:
- Is it possible to exempt from tax the meal allowance also for taxpayers working on the basis of an agreement for work or work performance agreement (agreements for work performed outside of employment status)?
In Section 6 para. 2, the Income Tax Act designates a taxpayer from gainful employment as an “employee”. Pursuant to Section 6 para. 1 letter a) point 1 Income Tax Act, income from gainful employment includes supply in the form of income from current or previous employment, service or membership status and similar status in which the taxpayer, whilst performing work for the income payer, is obliged to abide by the income payer’s instructions. This also includes incomes from gainful employment stemming from agreements for work performed outside of employment status. Pursuant to Section 74 para. 2 Labour Code, the employer is not obliged to schedule work time (fix shifts) for an employee where work under agreements for work performed outside of employee status is concerned. In order to assess a monetary meal allowance as a tax-exempt income as with other employees, it is necessary also in this case to fulfil the requirement for the existence of a work shift pursuant to the Labour Code. Pursuant to the provision Section 78 para. 1 letter c) Labour Code, the concept of a shift is understood as part of a week-long working time without overtime, which an employee is required to work off on the basis of a previously fixed work schedule. If a certain part of the working time (shift) is fixed in this manner, and it is best to express this specifically in the pertinent agreement, and subsequently to record it in the attendance record, it is then possible to assess a monetary meal allowance to taxpayers performing work on the basis of agreements for work performed outside of employment status under similar conditions to those for other employees.
- Is it possible to exempt from tax a monetary meal allowance also for limited liability company executives who perform work on the basis of duty performance agreements?
Income for the performance of an executive duty at a limited liability company (hereafter to be referred to as “executive”) is an income pursuant to Section 6 para. 1 letter c) Income Tax Act; an executive is thus, from the perspective of Section 6 para. 2 Income Tax Act, considered to be an employee. If the executive has a certain working time (shift), outlined in an agreement, to perform duties and this is subsequently recorded in the attendance record, for instance, then a monetary meal allowance provided to the executive can be assessed, pursuant to Section 6 para. 9 letter b) Income Tax Act, as an income within the designated tax-exempt limit, and on the company’s side this allowance can, given fulfilment of conditions stated in Section 24 para. 2 letter j) point 4 Income Tax Act, be applied as a tax expense (cost), i.e. if, among others, the presence of the executive at work during a fixed part of the working time (shift) is at least 3 hours in duration.
- Is it also possible to provide a monetary meal allowance in the context of home office, when presence or, more precisely, contact with the employee is, as a rule, required by the employer for the same time as the standardly scheduled working time at the employer’s workplace?
It applies also for employees performing work at a place other than the employer’s workplace – i.e. “from home”, that these employees, too, work in shifts. In this case too, one can provide employees with a monetary meal allowance as a tax-exempt income pursuant to Section 6 para. 9 letter b) Income Tax Act, and at the same time one can, in the case of work from home, apply the monetary meal allowance as an expense (cost) pursuant to Section 24 para. 2 letter j) point 4 Income Tax Act if the following two conditions are fulfilled: the place of residence has to be contractually concluded as a workplace and one has to be able to prove that at least 3 hours of work were performed in the bounds of a single shift. It is necessary that the time condition be confirmed in the record of work performed during a shift.
- Is it possible to provide several forms of meal allowances and can they be cumulated?
From the tax perspective, an employer can select how it arranges meals, but every employee can concurrently draw from only one of the forms in the tax-advantaged regime. Yet nothing precludes a situation where a part of the employees have meals at the employer’s own meal facilities, part of whom have received meal vouchers and part of whom have received a monetary meal allowance. Here it will depend solely on the agreement between the employer and employees in a collective agreement or in internal regulations as to the form which will finally be agreed.