Tax treatment of the costs of recreation of employees

The employer intends to lease the sports field. Employees would use on their own will. We are interested in tax treatment of expenditures for recreation of employees if these expenditures are predicted by the General act of the employer and with Labor contracts?


The answer:

First of all, the Employer should, with his General act or Labor contract determinate the possibility of renting sports fields or recreation halls for his workers and to determine the conditions under which the employees will use them, or as stated in the asked question, as required of the will of each employee.

According to the provisions of Article 13 of the Law on Personal Income Tax such an employer’s expense has the character of earnings of employees as doing and providing benefits to them, and according to the Labour Law the employees remuneration which were determined by General act as a right within the meaning of Article 120, paragraph 4) of this Law are the earnings of employees, having in mind that in Article 105, paragraph 3 of this Law, the remuneration referred to in Article 120, item 4) are not exempted from earnings.

According to the above, the employer’s expenses on the rental of sports fields and recreational halls have the character of the earnings of the employees and the tax and contributions on the earnings should be paid.

On this issue, the same position was taken by the Ministry of Finance.

From the opinion of the Ministry of Finance, no. 011-00-1041 / 2016-04 of 28 February 2017:

“According to the claims from the request, the General act with the employer stipulates that in order to improve the psycho-physical capabilities of all employees, the employer is obliged to provide various forms of recreation of employees. Regarding this, the employer rents a sports hall, tennis court, swimming pool and similar, for the purpose of recreation of employees, all in order to improve their psycho-physical condition, since most of the employees working hours are spending continuously in front of the computer. The employer would provide recreation for all employees by renting the listed facilities at the expense of his asset.

Pursuant to the provisions of Article 13 paragraph 1 of the Law on Income Tax of Citizens under the salary in the sense of this Law, is considered salary earned on the basis of employment, defined by the Law regulating labor relations and other earnings of an employee (Labor Law).

Earnings (salary), in the sense of this Law, are considered as receipts in the form of vouchers, stocks other than stocks acquired in the process of ownership transformation, money receipts, goods, as well as receipts realized by act or providing benefits, forgiving debt, as well as covering the expenditures of taxpayers compensation or direct payment (Article 14 paragraph 1 of the Act).

The provision of Article 15 stipulates that the tax payer is a natural person who have earnings.

Earnings from Articles 13 to 14b of this Law are taxed at a rate of 10% (Article 16 of the Law).

Accoriding to Article 13 paragraph 1 of the Law on Contributions for Compulsory Social Insurance the basis of contributions for employees and employers is salary, ie salaries and salary remuneration in accordance with the Law governing labor relations, the General act and the Employment contract, or decision of the competent authority.

Pursuant to the provisions of Article 105, paragraph 3 of the Labor Law all income from employment shall be considered as income, except income referred to in Article 14, Article 42, paragraph 3, item 4) and 5), Article 118, item 1) to 4), Article 119, Article 120, Item 1) and Article 158 of this Law.

Having in mind the aforementioned legal provisions as well as the allegations from the letter, in the case where the employer organizes various forms of recreation for employees for improving the psychophysical abilities of all employees by paying the rent of sports hall, swimming pool and similar we consider that such receiving of employees is making and providing benefits should be taxated with Personal Income Tax and contributions for compulsory social security based on earnings”.

Author: AKTIVA sistem

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