The new year brought a novelty in the area of employee bonuses, namely the so-called lump sum meal allowance. The monetary contribution for meals (the “meal allowance”) came into force on 1 January 2021 as part of an amendment to the Income Tax Act, adopted by Act No. 609/2020 Coll. before the end of 2020. The meal allowance package is an alternative to meal vouchers or company meals, which do not interfere with the introduction of the meal voucher package, and therefore complement the possibility of existing tax-advantaged meals. This is now the third way to provide employees with more tax-friendly meals.
A lump sum meal allowance in the amount that the employer intends to provide to the employee as a benefit will be added to the employee’s wage or salary.
The transition to a meal allowance should lead to a decrease in administration and costs of employers for fees and commissions, which are mainly associated with employer-provided meal vouchers to employees.
The tax regime for the provision of meal vouchers is regulated by two provisions of the Income Tax Act, as amended (the “ITA”). In accordance with Section 6 (9) (b) of the ITA, the employee is exempt from paying tax on the contribution provided by the employer to the employee for meals. From the employer’s point of view, this contribution is then a tax-deductible expense in accordance with Section 24 (j) (4) of the ITA.
For employers, a meal allowance is now a tax-deductible expense for achieving, securing and maintaining income. The difference compared to meal vouchers is that the employer pays the meal allowance to the employee directly with the wage or salary.
For employees, the meal allowance is exempt from personal income tax and does not enter into the assessment basis for the payment of social and health insurance.
To be a tax-paid and tax-advantaged meal voucher, it must be provided for one shift in accordance with the relevant provisions of the Labour Code and the implementing decree of the Ministry of Labour and Social Affairs.
We believe that the meal allowance package will be considered especially in companies where meal vouchers are now provided or where the employer does not provide any contribution to employees’ meals. If the employer has a company canteen in which it provides meals for employees, it will probably not consider switching to a meal allowance system.
So why use a lump sum meal allowance and what are its advantages, especially compared to meal vouchers?
- Meal vouchers are not accepted at all catering providers.
- When purchasing meal vouchers, the employer incurs additional costs for their administration. Especially for smaller companies, the meal voucher system is too administratively demanding and expensive. In the case of a meal allowance, which will be reimbursed to employees together with the salary or wage, these costs will be significantly reduced.
- Employers usually provide meal vouchers of less than the highest possible value for various reasons.
- Not all employees are willing to pay for meal vouchers, and therefore do not want to use this benefit. The meal allowance, on the other hand, is “adjusted” from this employee surcharge.
- Meal vouchers have an expiry date, which must be taken into account. In the case of a meal allowance, this concern is eliminated.
Of course, the employee will also not have to prove that they used the money received as part of the meal allowance for lunch at the restaurant, just as they do not have to prove this when using meal vouchers.
It is also important to note that meal allowance is an employee benefit and therefore employees are not automatically entitled to it. If an employer decides to provide this benefit to its employees, it must do so within the framework of an employment contract or its amendment or other bilateral agreement with the employee, as part of a collective agreement or by issuing an internal regulation.
If the employer is able to choose, issuing an internal regulation is in our point of view the most advantageous solution, as it is not bound to an agreement with the employees. However, an internal regulation cannot be issued retroactively, and employees must be demonstrably acquainted with it.
Nevertheless, employees will not be able to freely choose whether, for example, to switch from meal vouchers to a meal allowance. This decision is entirely the responsibility of the employer. Different groups of employees may be provided with different forms of meal allowances. However, the employer must in all cases observe the principle of equal treatment and prohibition of discrimination.
In conclusion, it is also worth noting that the lump sum meal allowance (up to the legal limit for the shift worked) is not part of the wage or salary and is neither a subject of judicial enforcement of a decision nor of execution.