Until recently, meal allowances took only two forms – either as paper meal vouchers or cards, or in the form of a factory canteen or canteen operation. Now we have a third option – a meal allowance lump sum. Who does it pay out to and when?
Until recently, meal allowances took only two forms – either as paper meal vouchers or cards, or in the form of a factory canteen or canteen operation. Now we have a third option – a meal allowance lump sum. Who does it pay out to and when?
A meal allowance is where an employer gives its employees a cash payment instead of meal allowances in the form of meal vouchers or subsidised lunches in the canteen. Even though this amount is intended for meals, it does not matter how the employee uses it or what he buys with it.
The aim of introducing this new option is to save the employer time and money that has to be invested in purchasing and registering meal vouchers, where a significant part of the cost is the commission to the providers of the meal vouchers (usually between 5 and 7%). This does not mean that meal vouchers are being abolished. This still leaves employers with these three options for paying their employees:
The law, or rather an amendment to the law, regulating the meal allowance was passed and came into force in 2021 as part of the tax package. So where to find the section on the meal allowance in the statute book?
The 2021 tax package is published in the Act amending certain tax laws and certain other laws. The broader context is provided by the Income Tax Act.
For classic meal vouchers, the employer is able to claim up to 55% of the cost of a meal in the company canteen or the cost of the meal voucher as a tax expense. The remaining 45% is then deducted from the employee’s salary. Thus, for example, if it is a paper meal voucher worth CZK 100, the employer pays CZK 55 and the employee pays the remaining CZK 45 from his/her salary.
This principle remains the same for the meal voucher lump sum. In this case, however, it works in such a way that the employer directly pays the CZK 55 to the employee as a cash amount and the remaining CZK 45 is not deducted from the employee’s salary.
Tip: Read more about benefits and payroll deductions in a separate article.
So how does meal voucher flat rate accounting work? This amount is tax-free, including the payment of social security and health insurance. It is also not included in net pay, so it is not subject to garnishment or insolvency. However, this is only the case if the amount paid by the employer does not exceed the limit of 70% of the upper limit of the meal allowance that can be granted to salaried employees during a business trip lasting between 5 and 12 hours. The upper limit of the meal allowance is set each year by the Ministry of Labour and Social Affairs. In 2023, this limit is set at CZK 153 and 70% therefore means CZK 107.10.
Tip: You can read about what can and cannot be subject to foreclosure in our separate article.
The meal allowance is most likely to be paid when the above-mentioned upper limit of the meal allowance is not exceeded. In this case, the amount is neither taxable nor subject to execution or insolvency and the employer can put it towards tax expenses.
However, once the situation arises that the amount of the meal allowance ceiling should be exceeded, then the employer must already pay the employee’s 33.8% insurance premium, the employee’s 11% insurance premium and 15% income tax on the amount. Whereas in the case of an excess meal voucher, only 15% income tax is payable.
A meal allowance carries significant benefits for both the employer and the employee. However, it also carries several disadvantages. Here is an overview:
Advantages
Disadvantages
Benefits
Disadvantages
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