GFD explains new meal allowance rules
From 1 January 2021, employers may use a new form of meal contribution under the amendment to the Income Tax Act: the monetary meal allowance. The General Financial Directorate (GFD) issued information that answers some of the questions raised by employers and the professional public regarding the tax deductibility of the new meal allowance on the employer’s part and its tax exemption on the employee’s part.
In the Information, the GFD answers the six most frequently asked questions.
Unlike conventional meal vouchers, the meal allowance is not exempt from income tax on the employee’s part without any limit. The information confirms that the new meal allowance is only tax exempt for up to 70% of the maximum subsistence expenses that can be compensated to state salary receiving employees on business trips lasting 5 to 12 hours (CZK 75.6 for 2021). This limit applies for a shift of any length. It is thus not important how many hours the employee actually worked within the shift – the tax exemption applies even if the employee worked only two hours in the shift, for instance.
Further questions concern the possibility of providing the meal allowance to executives/members of statutory bodies and employees working under agreements to perform work/complete a job (rather than employment contracts). The GFD confirms that employers may pay the meal allowance also to these persons, as long as their working hours are scheduled in shifts. For the expense to be tax-deductible on the employer’s part, the shifts must be defined in the relevant agreement or contract, and the employee or executive must work at least three hours within the specified shift. At the same time, subject to the conditions of the Income Tax Act (ITA), the exemption on the employee’s part can be applied.
Questions about the new meal allowance also concern employees working from home. The ITA does not in any way limit the place of performance of the employee's activities. However, the employer must contractually designate the place of residence as a workplace. Then the meal allowance can be exempted from the tax on income from employment and included in the tax-deductible expenses on the part of the employer. The GFD stresses that working at least three hours in a shift must be confirmed by keeping records of the hours worked.
Finally, the Information deals with the possibility of combining various types of meal allowances. The GFD has clarified this issue, confirming that one employee can only draw one type of allowance at a time. However, nothing prevents employers from providing different types of allowances to different employees.