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How to tax the employee meal contribution? or Financial contribution for meals as a tax expense?

How to tax the employee meal contribution? or Financial contribution for meals as a tax expense?

5/19/2021
How to tax the employee meal contribution? or Financial contribution for meals as a tax expense?
At the end of April, the Financial Administration of Slovak Republic issued a methodological instruction on the taxability of the employee's meal allowance, which is to ensure a uniform approach in assessing the taxability of the employee's income as well as in the application of tax expenses related to meals.

In connection with the amendment to Act No. 76/2021 Coll., among other, employees have been given the opportunity to choose between a meal voucher or a financial contribution.
This obliges employers to have the details of the choice of diet set out in the internal directives. If you need our assistance in preparing an internal directive or are interested in more detailed information on this issue, please do not hesitate to contact us.

The Labour Code stipulates that the provision of a financial contribution cannot lead to an advantage or disadvantage for an employee compared to an employee to whom a meal voucher is provided. In practice, however, differences may or may not occur.

The amount of the earmarked meal allowance that an employee receives from his employer in the form of a meal voucher may include:

  • obligatory employer's meal contribution in the amount of min. 55% of the value of the meal,
  • contribution from social fund,
  • voluntary contribution of the employer above the statutory limit. 

If an employee prefers to be provided meals in the form of a financial contribution, this will contain the same components, but there may be different effects on the employee's taxable income. 

Provision of meal in the form of a meal voucher represents a non-monetary benefit provided to the employee, and thus the entire value of the meal voucher paid by the employer represents the non-monetary income of the employee exempt from tax based on § 5 par. 7 letter b) of Act 595/2003 Coll. on Income Tax. The exemption from the Income Tax Act can also be applied to the financial contribution for the provision of meals, but not automatically to the value of voluntary employer's contribution.

In the case of a financial contribution, the voluntary employer’s contribution is considered to be a monetary benefit provided to the employee and should be taxed as income from dependent activity. This applies if the employer wants to consider the amount of the voluntary contribution as a tax expense. However, if the employer still considers the voluntary meal contribution as a non-tax expense, as in the case of a meal voucher, this income can be exempted if the difference between the taxation of the meal voucher and the financial contribution does not occur from the employee's point of view.

The method of providing meals for employees should not cause a difference on the part of the employer in terms of recognition of expenses in tax costs. 

In accordance with § 19 par. 2 letter c) point 5 of the Income Tax Act, the employer's expenses for employees' meals in the amount of 55% of the value of the meals are considered as tax expense, regardless of whether they were provided in the form of a meal voucher or a financial contribution.

Expenditures from the social fund for the payment of meals always represent tax expenditures, as they are employer's tax expenditures according to § 19 par. 1 at the time of creating the social fund.

In the case of a provision of financial contribution, the employer has the opportunity to decide whether or not to consider the voluntary meal contribution as a tax expense. Upon this decision it will be decided whether that amount will constitute a monetary benefit for the employee or will be treated in the same way as the issuance of a meal voucher in which the voluntary contribution is considered as a non-tax expense and thus an exempt income for the employee.

As stated above, whether the choice of the method of providing meals will cause differences in the taxable income of employees depends more on the decision of the employer rather than the employee himself. If the employer does not want to differentiate between his employees, he will keep the voluntary meal allowance as a non-tax expense, thus achieving the same amount of exempt income for his employees.