Do you plan to provide your employees with cash contribution instead of meal vouchers? If your employees work for you on a different basis than under an employment contract with an 8-hour shift, read on. Meal voucher lump sum is not suited for everyone.
Since January 2021, companies can provide contributions towards meals to their employees not only through traditional meal vouchers but also through a cash contribution which is commonly referred to as a meal voucher lump sum.
However, the adoption has given rise to many questions, especially in non-standard situations. The Financial Administration has already responded to many of these questions on their website. We provide an interpretation of these answers in this article.
Statutory director
The tax law makes the exemption of a cash contribution conditional on the recipient’s working on a shift. Statutory director’s function on the basis of a special agreement is not subject to Labor Code, making it hard to decide whether they work shifts or not.
Based on the standpoint of the Financial Administration, there should be a period of time stipulated in a director’s agreement that would be subject to time keeping (an equivalent of a shift). Under this condition it becomes possible to pay to a director a meal voucher lump sum which will be considered tax exempt (up to the provided limit).
For the company such payment is a tax-deductible cost, subject to fulfillment of other general conditions, e.g. period of time spent by the director at work (shift) must be at least 3 hours.
One-off job contracts (“DPČ” a “DPP” in Czech)
In accordance with Labor Code, one-off job contracts do not have to stipulate exact working hours (shift duration).
If a meal voucher lump sum is to be considered as tax exempt income, it is necessary to fulfill the condition of existence of a shift and therefore include a working hours schedule in the given contract. Based on records of working hours, the meal voucher lump sum can then be considered as tax exempt income as in case of other employees.
Shift longer than 11 hours
If you provide your employees with meal vouchers (i.e. contribution in non-cash form), the Income Taxes Act enables you to provide two meal vouchers in case of shifts with duration of more than 11 hours. Both represent a tax-deductible cost.
In case of a meal voucher lump sum, the situation is different. The Income Taxes Act does not provide for any second meal voucher lump sum. Even in case of shifts longer than 11 hours, the entitlement is limited to one meal voucher lump sum only.
If your employees work long shifts, it can therefore be more beneficial to continue to provide them with traditional meal vouchers.
Short shift
How to consider a situation when an employee works fewer hours than what is stipulated? If an employee works only 2 hours on a given day e.g. due to a visit to a doctor, this gives rise to a special situation. Meal voucher lump sum will be tax non-deductible for the employer, but the income will be tax exempt for the employee.
Home office
In Financial Administration’s interpretation, to achieve a tax exemption for the meal voucher lump sum on the part of the employee working from home office, it is required that (i) place of residence be contractually agreed as place of work and (ii) it should be substantiable that the shift lasted at least 3 hours (best through record of hours worked).
Home-bound employee
We would like to add that work from home can have several guises. Home work need not always be divided into shifts. The so-called home-bound employee (e.g. seamstress) carries out their work based on agreed conditions during working hours which they schedule themselves.
Such employees have no entitlement to wages nor compensation for overtime work, or extra payments for work during holidays (Article 317 Labor Code). Often, such employees are also compensated based on tasks performed. This should therefore exclude the possibility to provide a meal voucher lump sum as tax exempt income.
Hybrid regimes are nothing to worry about
As an employer you can choose how to contribute to meals of your employees. Nothing should prevent you from providing meal voucher lump sums to some employees, traditional meal vouchers to others, and the possibility to use own canteen to a third group. However, to achieve the tax beneficial treatment, every employee can only use one of the benefits in any given period.
If you are still unsure which form of contribution will be the most efficient for your company as well as your employees, we will be happy to assist you. Our experience and expertise save you time and money.
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