Money instead of meal vouchers
17 February 2020
The Ministry of Finance's proposal to extend the employers' contribution to employee meals as tax-free income by deducting amounts directly from the tax base – a "meal voucher lump sum" – is one of the positive amendments to the Income Tax Act. At long last, this is an effort to simplify the tax system and reduce administrative costs for employers.
The Ministry of Finance's proposal to extend the employers' contribution to employee meals as tax-free income by deducting amounts directly from the tax base – a "meal voucher lump sum" – is one of the positive amendments to the Income Tax Act. It shows where the meal voucher lobby has its supporters, who are releasing many distorted data into the media.
Above all, it is not about abolishing the existing form of paper or digital meal vouchers. The tax advantage of lump sum contributions for meals will have the same regime as meal vouchers to date. Thus 55% of the amount of meal allowance will be a tax expense for the employer, while the remaining part will be paid by the employee. If the employer pays the full amount of the meal allowance, then 45% will be from the employer's profit. The main things is that the full amount of the meal allowance is exempt from income tax for the employee. Even today, the contribution to social security and health insurance is not subject to contributions. Also, the limit for the total amount of the contribution provided by the employer will continue to refer to the percentage of the meal allowance earmarked for employees during a business trip of five to 12 hours. Currently, the limit is 70% of the meal allowance.
The proposal is neither a new benefit nor a complication of the law. On the other hand, a significant simplification of the system and a reduction in administration as well as the removal of commissions for meal voucher distributors can be expected for employers. Simplification can also be expected in the field of VAT, since the employer's own contribution is not subject to tax, the tax is paid when the food is consumed or purchased by the food provider. The question whether a meal voucher is a single-purpose voucher and imposes an obligation to pay tax will no longer be relevant. Finally, the handling of paper meal vouchers is also eliminated. Obviously, an increase in the number of employees whose employers will receive a new subsistence allowance will lead to a reduction in state budget revenues. I believe it will not be dramatic and the Ministry of Finance will not be afraid of its own proposal.
Therefore, we encourage employers to monitor this draft tax legislation and modify their own procedures. Employees view the meals allowance as a significant benefit. Let us not forget that besides providing a contribution, this benefit also includes creating conditions for employees to eat during their work shift. In addition to reducing company's administrative costs, I expect that catering establishments, where meal voucher sales account for 10-15% of total revenue, will save at least 5% on commission for meal vouchers distributors and hence a new "meal voucher lump sum" will be more useful than complicating the VAT rates on beer.