The cost of meals included in travel documents: how business trip expenses are taxed

The cost of meals included in travel documents during a business trip often raises questions among employers and employees regarding the procedure for its taxation. The issue is especially relevant as to whether such expenses are considered an additional benefit to the employee and whether they are subject to personal income tax.

Which business trip expenses are not included in taxable income

According to subparagraph 165.1.11 of the Tax Code of Ukraine, funds received by an individual for a business trip or on account are not included in the total monthly (annual) taxable income, provided they are used and reported in accordance with the requirements of paragraph 170.9 of the Tax Code.

At the same time, paragraph 170.9 of the Tax Code establishes the procedure for taxing excess funds spent that were issued for a business trip or on account and not returned by the taxpayer within the deadlines established by law.

According to subparagraph 170.9.1 of the Tax Code, amounts of business trip expenses reimbursed by the employer in the prescribed manner and within actual expenses are not considered income of the employee or a member of the governing body of an enterprise, institution, or organization. Such expenses include travel to and from the business trip location, including baggage transportation and ticket booking, local transportation at the business trip location, including rented transport, payment for accommodation in hotels and motels, as well as meal and household service expenses if they are included in accommodation bills.

Additionally, the list includes expenses for housing rental, telephone communication, issuance of foreign passports, visas, mandatory insurance, as well as other properly documented expenses related to compliance with entry and stay rules in the country or place of the business trip. Such expenses also include fees and taxes that must be paid in connection with their execution.

However, these expenses are exempt from taxation only if there are documents confirming their cost.

The number of days an employee spends on a business trip is determined based on the business trip order and confirmed by one or more documents. These may include border service stamps confirming crossing of the state border, travel documents, accommodation bills, or other documents confirming the actual presence of the person on the business trip.

To confirm expenses, transport tickets, transport invoices, and baggage receipts, including electronic forms, may be used. Also, documents from accommodation service providers, insurance policies, bank statements, and other information regarding payment transactions on accounts linked to payment instruments are considered confirming documents. Additionally, documents confirming transactions made using payment instruments, as well as other documents certifying incurred expenses, may be used.

What per diem rates apply in Ukraine and abroad

Tax legislation also provides that expenses for meals and other personal needs of the employee during a business trip are not included in taxable income, even if they are not documented. This refers to per diem expenses paid in connection with the business trip within established limits.

For business trips within Ukraine, the amount of non-taxable per diem cannot exceed 0.1 of the minimum wage established as of January 1 of the respective tax year for each calendar day of the business trip. For foreign business trips, the maximum per diem amount is no more than 80 euros per day at the official hryvnia-to-euro exchange rate set by the National Bank of Ukraine.

The procedure for determining the composition and amount of business trip expenses for civil servants and other employees of enterprises, institutions, and organizations fully or partially funded from the budget is established by the Cabinet of Ministers of Ukraine. For such categories of employees, the per diem amount cannot exceed the limits defined by the Tax Code.

The per diem amount is determined depending on the country of the business trip. If the business trip is within Ukraine or to countries where Ukrainian citizens do not require a visa, the basis is the business trip order and primary documents. In the case of trips to countries with a visa regime, documents confirming the employee's actual stay abroad are also required, including border service stamps, travel documents, accommodation bills, or other confirming documents.

If the relevant confirming documents are missing, the amount of paid per diem is included in the individual's taxable income.

Is the meal included in the ticket price taxable?

The State Tax Service notes that the basic regulatory document governing the procedure for official business trips of employees of state authorities, as well as enterprises, institutions, and organizations fully or partially funded from the budget, is the Instruction on official business trips within Ukraine and abroad, approved by the Ministry of Finance of Ukraine Order No. 59 dated March 13, 1998. At the same time, non-state sector enterprises may also use the provisions of Instruction No. 59 as a guideline in their activities.

According to the fourth paragraph of point 5 of section II, subparagraph "d" of subparagraph 16.2 of section III of Instruction No. 59, and point 2 of the Cabinet of Ministers of Ukraine Resolution No. 98 dated February 2, 2011, meal expenses, if their cost is included in travel documents, are reimbursed by the employee at the expense of per diem.

If the travel document price for a business trip within Ukraine or abroad includes meals without separately specifying their cost, per diem is paid in a reduced amount. Specifically, for one meal, 80 percent of the established per diem amount is paid; for two meals, 55 percent; and for three meals, 35 percent.

Therefore, if an employee of a legal entity not funded from the budget uses meals during a business trip in Ukraine or abroad, the cost of which is included in the travel document, such expenses are considered part of the per diem expenses. They are accounted for within the limits defined by subparagraph 170.9.1 of the Tax Code and are not included in the employee's taxable income.

At the same time, for employees of enterprises, institutions, and organizations fully or partially funded from the budget, meal expenses included in the travel document cost during a business trip are also part of the per diem. In this case, their amount is determined according to Cabinet of Ministers Resolution No. 98, and the amounts themselves are not subject to personal income tax.

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