In this particular case, the company provided to its employees travel allowances associated with the hiring of employees according to Section 152 letter f) of the Labour Code – it was, specifically, the reimbursement of expenses for the use of private vehicles of its employees for travels from home to their place of work and vice versa. These above-mentioned reimbursements were paid based on an internal regulation, whereas the justification was the lack of labour supply on the local labour market. Thus, the company did not pay any advances on income tax from dependent activities from these amounts.
However, the tax administrator concluded that in order for tax allowances to be a tax-deductible expense when hiring employees, which would be exempted from income tax on the employee’s side, they must be domestic travel expenses. His argument could be thus summarized as follows that Section 166 of the Labour Code deals with the provision of travel allowances for business trips abroad, nevertheless, this provision lacks the possibility of providing allowances when hiring to employment.
At first, The Supreme Administrative Court stated that Section 177 is incorporated under Chapter III, Part 7 of the Labor Code referred to as a “Reimbursement of Travel Expenses to Employees of Employers Referred to in Section 109 (3)”. Nevertheless, according to Section 156 (3) of the Labour Code, its application can also be deduced for employees from the private sector.
Subsequently, the court concluded that the reimbursement of travel expenses on recruitment is voluntary from the side of the employer. However, if the reimbursement is specified, it is limited to the same amount and conditions that apply to the transfer, or temporary assignment of an employee to another employer to another place of work according to Section 165 part 1 in conjunction with Section 157 to Section 164 of the Labour Code. At the same time, a time limit applies to this type of reimbursement in accordance with Section 177 part 2 of the Labour Code. This voluntary institute of reimbursements upon employment is thus applicable for both, employers from the non-business sphere as well as those from the business one, whereas in none of the cases will it be a taxable income of the employee. The court also confirmed the opinion of the tax subject that the cited legal regulation does not imply any restriction on the concept of travel reimbursement for expenses for trips made only within the Czech Republic in the sense of Section 152 part f) of the Labour Code.
This is an example of a positive court decision. It still strikes me that the state administration “constantly” tries to use a pure linguistic interpretation of the norm in its legal opinions – in case it fits, of course – or tries to convince the court of a “new perspective” in the area of regulation, which, from my point of view, has already been resolved and in which there is a general consensus on the professional ground.
In case your company provides travel allowances to its employees, and you would like to revise the system, do not hesitate to contact us, we will be more than happy to help you in this area.
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