From January 2021, the Czech legislation has enabled providing tax-advantaged meals to employees not only by means of canteens or luncheon vouchers, but also in monetary form. This is a relatively revolutionary change, which mainly brings employers, who decide to transfer from luncheon vouchers to this flat-rate contribution for meals, a significant decrease of administrative burden for their employees, who calculated the employees’ entitlement to luncheon vouchers and subsequently distributed them to the individual employees.  Employers will also not need to pay the costs and commission, which related to ordering these luncheon vouchers. A number of especially smaller companies did not offer luncheon vouchers as a benefit to their employees at all, mainly due to increased administration and the need to pay commission to companies producing the vouchers. In general, a greater number of employers is now expected to use the introduction of a flat-rate contribution to meals as a benefit for their employees. This will make tax-advantaged meals accessible to more employees, who were not able to use this advantage before.

Another advantage of the flat-rate contribution is that employees no longer need to look for restaurants, where they could use their vouchers, because one third of the restaurants does not accept luncheon vouchers at all.  At the same time, this will mean administrative relief for restaurants, where luncheon vouchers are accepted, due to the commission of 5 to 7 % of the nominal value of one voucher. An indisputable bonus is also the fact that restaurants will receive payment for the food immediately, without needing to wait for settlement from luncheon voucher companies, which took days or weeks.

Debtors affected by distrainment or enforcement will also welcome the flat-rate contribution. This is because the flat-rate contribution to meals cannot be subject to enforcement or distrainment, and the obligation of the above-mentioned deductions does not apply to it after it has been paid to the employee.  

Another advantage is, too, that the employee need not pay attention to the validity of luncheon vouchers, some part of which often lapsed for many people at the beginning of the following year. Official estimates mention up to CZK 100m worth of lapsed luncheon vouchers every year, which thus became net revenue for luncheon voucher companies.

Tax-eligibility of the costs of luncheon vouchers and the flat-rate contribution to meals

The amount of the flat-rate contribution to meals, which is exempted from the income tax, is set at 70 % of the upper limit of subsistence expenses that can be provided to employees remunerated with a salary during a business trip lasting 5 to 12 hours. In the year 2021, the maximum amount of the contribution thus reaches CZK 75.60 per one shift. A difficulty may arise here for employers, if they provided 2 luncheon vouchers for shifts longer than 11 hours. If a shift is longer than 11 hours, for example, and a double financial contribution is granted to the employee, thus reaching the amount of CZK 151.20, on the side of the employee the income will be exempted only in the amount of CZK 75.60. The remaining part will be taxable income. In case non-monetary performance (luncheon vouchers) is provided for a shift longer than 11 hours, the employee may receive 2 vouchers without the need for additional taxation. On the part of the employer, it then represents tax-eligible cost in case of a flat-rate contribution to means, if the employee is present at work during the specified shift for a minimum of 3 hours.

Compared to the limit for the flat-rate contribution to meals (70 % of the upper limit of subsistence expenses that can be provided to employees remunerated with a salary during a business trip lasting 5 to 12 hours), it is necessary to note that the non-monetary (in-kind) form of contribution to meals (i.e. the luncheon voucher) is exempted on the side of the employee without limitation. The employer may provide a luncheon voucher in the amount of CZK 130, for example, to the employee, fully paid by the employer without the need of deductions on the part of the employee. The amount of tax-eligibility for non-monetary performance on the part of the employer is limited, though, according to article 24 paragraph 2 letter j) item 4 of the ITA.

It is also necessary to attend to tax effects, if the flat-rate contribution to meals is provided to an executive working on the basis of an agreement to perform the duties of an executive. In this case, the provided flat-rate contribution to meals would mean taxable income due to the fact that an executive does not have a specified schedule of shifts, for which the provision of exempted flat-rate contribution to meals is defined.

Rounding off the financial contribution

The financial contribution, if expressed for the entire month with a decimal number, needs to be rounded down to entire korunas always.  This is due to the CZK 75.60 limit per shift, which must not be exceeded. In case of rounding up, obligatory taxation would occur. Although when calculating tax prepayments, a tax base higher than CZK 100 is rounded up upwards to entire hundreds and the influence on tax prepayment would be very small, there could certainly be situations, when even CZK 0.20 would mean higher tax prepayment.

It follows from the above that for a vast majority of employers, transfer to flat-rate contribution to meals will mean significant financial and administrative savings. As stated above, though, there are partial difficulties, where it will be necessary to consider, when it will be more advantageous for the company (for example in case of 12-hour shifts etc.) to continue to provide non-monetary contribution to employees, that is luncheon vouchers, or possibly to provide luncheon vouchers to some employees and pay a flat-rate contribution to meals to other employees. It is necessary to keep in mind, however, that such a solution always needs to be defined by an internal guideline of the employer.