The Czech Ministry of Finance is working on an amendment to the Income Tax Act, which should, inter alia, enable both entrepreneurs and employees to use the tax advantage for meals in a new and simpler way. Meal vouchers are a popular and frequently provided benefit in the Czech Republic.
This “meal allowance” would allow employees to receive money from their employer instead of traditional meal vouchers, without the involvement of the company that sells meal vouchers. Such a meal allowance would continue to be exempt from tax and insurance payments for employers.
Employers, as well as entrepreneurs that accept meal vouchers as a means of payment for their goods or services, would face less administration. This is currently the biggest drawback and obstacle of the current meal voucher system. Another major reason is the fees paid to meal voucher companies. These normally range from 5 to 7%. In addition, in the event of forfeiture of a meal voucher, the meal voucher becomes net income of the company that issued the meal voucher.
The purpose of the tax advantage is to support canteen meals. According to the data of the Ministry of Finance, less than half of employees can use this option, i.e. approximately 1.8 out of 4.3 million employees in the Czech Republic. Another 1.5 million employees receive meal vouchers in the form of a benefit from their employer. This means that the remaining quarter, i.e. approximately 1 million employees, does not have access to either of these benefits. Therefore, by preparing the amendment and introducing the meal allowance, the Ministry of Finance intends to support the provision of meal allowances to employees who do not have the opportunity to use the meal allowance in the form of meal vouchers or canteen meals.
The possibility of providing meal vouchers under the current regime would remain unchanged. Thus, if the above amendment is adopted, employers could choose a way of providing the meal allowance. Either they will provide their employees with meals (company cafeterias, canteens) or vouchers (traditioanl meal vouchers). In both of these cases, the employer’s tax deductible expense is 55% of the price of the meal or meal voucher value and 45% is deducted from the employee’s net salary. As a third alternative, the employer could now use a tax-exempt meal allowance, which would allow the employee to receive money instead of meal vouchers, without the existence of a paid intermediary.