About the daily allowance and tax treatment of it
Tax News (continued)
May 8, 2017
Avoiding tax risks associated with daily allowance payments
May 12, 2017
Most private companies use employee delegation for different purposes. With the delegation or any form of business travel, there are several questions asked at the company level: “are we paying the daily allowance?”, “are we paying for travel or accommodation?”, “what is the amount of daily allowance?”, etc
In an attempt to clarify such questions, we present further on a brief analysis of the situations that arise in practice. This analysis refers to private companies, not to state-owned companies.
What is the amount that can be paid to the employee as daily allowance?
Legally, there is no a maximum or minimum amount for daily allowance in case of private companies. It is advisable that the daily allowance value be stipulated in the collective labor contract or in an addendum to the individual labor contract. The employer may therefore pay any amount per day as a daily allowance.
What is the tax treatment for daily allowance?
Tax treatment is determined by the threshold of 42.5 lei (2.5 times the daily allowance for public institutions, which is 17 lei / day). Thus, if the daily allowance is less than 42.5 lei / day, then the expense is entirely deductible. However, if the daily allowance is higher than 42.5 lei / day, the difference in value versus 42.5 lei is taxed at the employee level. The calculation of the tax is made by the “Great Gross Regime”, this sum is calculated by all salary contributions:
- income tax;
- health contribution for the employee and employer;
- pensions contribution for the employee and the employer.
According to Government Resolution no. 23/2015, no meal vouchers will be given for the period when the employee is in the delegation and he / she receives a daily allowance. The daily allowance is not justified with invoices / receipts by the employee, this amount being used for food and transport in the respective locality.
How do the money are paid to the employee?
Money can be sent to the employee by bank transfer or cash withdrawal from the cashier. There is no cash limit for cash out of the cashier for travel purposes.
We will continue this analysis in Friday’s article, on May 12, 2017, with a presentation of how to pay daily allowances to avoid fiscal issues.
