Subsistence on business trips are increasing in 2021

Author: Veronika Žáčková
In the regular period from 1 January, the Ministry of Labor and Social Affairs changes the amount of meal allowances based on the development of prices. Food and drinks in public catering establishments became more expensive in 2020, so employers will have to pay their employees more during a business trip in year 2021.

If you send an employee on a business trip, you are obliged to reimburse them for a meal. Meals, unlike other expenses, are entitled by law to a lump sum or meal allowance determined according to the number of hours spent on a business trip. Therefore, the employee is not required to prove expenses related to meals, unlike expenses related to transport or accommodation.

Domestic subsistence 2021

Ordinance 589/2020 Coll. the Ministry of Labor and Social Affairs has come into force the new basic meal allowance rates in the Czech Republic valid from 1 January 2021. Employers will pay up to four crowns more in the first zone, by seven crowns in the second zone, and by eleven crowns in the third zone. Rates have been increased by the same amounts as in 2020.

The following ranges are valid for the non-business sector for 2021:

  • CZK 91 to CZK 108 if the business trip lasts 5 to 12 hours,
  • CZK 138 to CZK 167 if the business trip lasts 12 to 18 hours,
  • CZK 217 to CZK 259 if the business trip lasts more than 18 hours.

The minimum rates for the business sector will be increased:

  • CZK 91 if the business trip lasts 5 to 12 hours,
  • CZK 138 if the business trip lasts 12 to 18 hours,
  • CZK 217 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, which has to keep the prescribed ranges.

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 employee has to tax it in his own wage. However, the employer may include all travel compensations, 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 for over 18 hours.

Foreign subsistence 2021

During abroad business trips, employees can also get to countries, where the meals in public catering establishments are significantly more expensive. The law refers to this situation to provide employees with adequate financial compensation to cover all-day meals in public catering establishments of medium quality (high quality in the case of travel to developing countries).

The amount of travel allowances reflects the country's price levels and reacts to possible foreign exchange rate fluctuations.

In 2021, the basic rate of foreign meal allowance has been changed for 17 countries.

Examples of countries where foreign meal allowances have increased include Sweden (from EUR 50 to EUR 55), Slovenia (from EUR 35 to EUR 40), or Bulgaria (from EUR 34 to EUR 40). The rates will also increase in countries like Afghanistan, Albania, Chad, Indonesia, Cuba, Nigeria, or Taiwan.

The meal allowance is unchanged in other countries and remains the same as in the year 2020.

The basic rate applies to business trips in which the employee spends more than 18 hours on a calendar day. If it is shorter than the border, it 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. This company's benefit is certainly desirable to be anchored in the company's internal guidelines. 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 advance tax or 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 other 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. If the pocket money is described in the internal guideline, it is also not subject to corporation tax. Pocket money as a benefit also is not subject to shortening due to a shorter business trip or the provision of free meals.

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.

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Veronika Zackova
Veronika Žáčková
Accounting Manager

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