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Meal allowance on business trips are increasing in 2020

Veronika Žáčková
12/12/2019
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The end of the year is the time of balancing the past period, but also the time of planning the development of the business and this may be related to the planning of business trips in the year 2020.

When you send an employee on a business trip, you must reimburse them for transportation, food and drink, accommodation and other necessary expenses related to his travel. While transport and accommodation are reimbursed by the employer on the basis of actual expenditures, the employee does not have to provide a proof of consumed food and drink. He is entitled by law to a lump sum or meal allowance determined according to the number of hours spent on a business trip, regardless of whether he actually spent money or not.

 Meal allowance in Czech Republic in 2020

The Ministry of Labor and Social Affairs has already published a proposal for new meal allowance rates for business trips in the Czech Republic valid in 2020. As food and soft drinks in restaurants became more expensive this year, employers will also have to pay more to employees in the new year. The minimum amount of Czech subsistence will be increased by four crowns in the first time zone, by seven crowns in the second zone and by ten crowns in the third zone.

The following ranges are valid for the non-business sector for 2020:

  • CZK 86 to CZK 102 if the business trip lasts 5 to 12 hours,
  • CZK 131 to CZK 157 if the business trip lasts 12 to 18 hours,
  • CZK 205 to CZK 245 if the business trip lasts more than 18 hours.

The minimum rates for the business sector will be increased:

  • CZK 86 if the business trip lasts 5 to 12 hours,
  • CZK 131 if the business trip lasts 12 to 18 hours,
  • CZK 205 if the business trip lasts more than 18 hours.

Thus, a private company is bound by a lower limit, but it can also reimburse employees any higher allowance - unlike the state administration, it is not limited by the upper limit.

If the employer in the business sector provides the employee with compensation higher than that allowed by the Labor Code to provide employees in the non-business sector, the over-the -limit amount is subject to personal income tax from dependent activity as well as to health insurance and social security contributions. However, the employer may include all travel compensations (even the amounts over the limit), which were paid to the employees, in tax deductible expenses.

For every meal provided to employees free of charge, having the character of breakfast, lunch or dinner, the meal allowance is reduced

  • 70 % for a business trip of 5 to 12 hours,
  • 35 % for business trips ranging from 12 to 18 hours,25 % for business trips over 18 hours.

 Meal allowance abroad in 2020

The aim of the compensation on business trips is to ensure employees with adequate financial compensation to cover all-day meals in public catering establishments of medium quality. Alternatively, in first-class facilities if the employee travels to developing countries in Asia, Africa or Latin America.

The amount of travel allowances reflects the country's price levels and reacts to possible foreign exchange rate fluctuations or changes in year-on-year consumer price indices abroad.

For 2020, the Ministry of Foreign Affairs proposed to increase the basic rate of foreign meal allowance for 23 countries. It remains unchanged for other countries.

Examples of countries where foreign meal allowances have increased include Denmark (from EUR 50 to EUR 55), Ireland (from EUR 45 to EUR 50), Luxembourg (from EUR 45 to EUR 50) or Spain (from EUR 40 to EUR 45) and United States (from $ 55 to $ 60). The rates will also increase in countries like Australia, Malaysia, New Zealand, Oman, Saudi Arabia, Singapore, Syria and Venezuela.

The basic rate applies to business trips in which the employee spends more than 18 hours in a calendar day. If his presence outside the CR is shorter, he may receive only two-thirds of the rate (from 12 to 18 hours) or only one-third (less than 12 hours but at least an hour).

The employer may pay a higher than the basic rate to the employee. For the employer, the total amount of meal allowance is the tax-deductible expense, however, from the amount of meal allowance above the maximum limit, the employees pay mandatory social security and health insurance, as well as personal income tax.

Meal allowances may also be reduced if food is provided free of charge to employees on a business trip abroad. It means breakfast, lunch or dinner, not just a small snack.

The meal allowance for each meal is then reduced as follows:

  • The base meal rate can be reduced by up to 25% for each free meal,
  • A two-third base rate can be reduced by up to 35% for each meal,
  • One third of the basic rate can be reduced by up to 70% for each free meal.

If you want to give your employees more money on a business trip abroad, so that they do not have to pay tax and insurance contributions, you have the option of paying them the pocket money. This can be up to 40% of the foreign meal allowance and you do not need to charge the employee back. Pocket money as a benefit also is not subject to shortening due to a shorter business trip or the provision of free meals. Pocket money paid to an employee represents tax deductible cost for the employer.

The complete issue of providing meals and pocket money to employees can be confusing for you, and it can also be used as a tool of the company's benefit system. If you are unsure whether you are calculating your employees' travel expenses in accordance with applicable regulations and how to advantageously set up employee compensation to minimize the impact on company and employee taxes, please, contact us.

Author

Veronika
Veronika Žáčková
Accounting Team Leader
Crowe