en
Important points regarding the formalization of employees' meal expenses
Important points regarding the formalization of employees' meal expenses
One of the changes made to the Tax Code starting from January 1, 2024, was related to the deduction of employees' housing and meal expenses from income. With the decision of the Cabinet of Ministers of the Republic of Azerbaijan dated November 22, 2024, the "Rules and procedure for the deduction from income for tax purposes of representative expenses, employees' housing and meal expenses, as well as expenses for providing treatment and preventive meals, milk, and other products and means equivalent to it for employees working in harmful, heavy conditions or underground" was approved. So, in which cases are these payments considered part of the employee's taxable income?
Avez Guliyev from the State Tax Service under the Ministry of Economy clarified these points and discussed important aspects of formalizing employees' meal expenses.
According to him, despite the approval of the relevant regulations regarding employees' meal expenses in November 2024, the rules will apply to the meal expenses incurred by taxpayers in 2024, as determined by the decision: "Three forms of norms have been defined for the payment of employees' meal expenses: when the cost of the meal is paid directly to the employee, when meal preparation is provided by the employer, or when catering services are obtained from another taxpayer engaged in public catering.
When the meal cost is paid directly to the employee without cash, the compensation for the meal within the norm, according to Article 98.5 of the Tax Code, is not considered part of the employee's taxable income, and this income is not subject to income tax or mandatory state social insurance contributions.
If the meal cost paid to the employee exceeds the established norm, the excess portion is included in the employee's taxable income. This portion is subject to income tax and mandatory state social insurance contributions.
Moreover, if the provision of meals to employees is carried out by the employer itself or through a contract with catering service providers, the meal expenses incurred within the norm are considered deductible expenses for the employer.
If the expenses exceed the norm, meaning the employee benefits materially from it, regardless of whether the expenses are within or beyond the norm, they do not form taxable income for the employee."
Guliyev emphasized that, in general, meal expenses within or beyond the norm are social expenses not included in the composition of wages, and they are not subject to unemployment insurance contributions or mandatory medical insurance contributions.
He also added that if a non-cash payment is made for employees' meal expenses, the payment's purpose must specify that it is for meal expenses. If the employee's meal expenses are paid to a third party or meal preparation is provided by the employers themselves, the transaction is formalized in accordance with the rules established by the Tax Code, including an electronic invoice. In this case, the note section of the electronic invoice issued by the catering service provider must specify that the payment is for the meal expenses of the taxpayer's employees.
One of the changes made to the Tax Code starting from January 1, 2024, was related to the deduction of employees' housing and meal expenses from income. With the decision of the Cabinet of Ministers of the Republic of Azerbaijan dated November 22, 2024, the "Rules and procedure for the deduction from income for tax purposes of representative expenses, employees' housing and meal expenses, as well as expenses for providing treatment and preventive meals, milk, and other products and means equivalent to it for employees working in harmful, heavy conditions or underground" was approved. So, in which cases are these payments considered part of the employee's taxable income?
Avez Guliyev from the State Tax Service under the Ministry of Economy clarified these points and discussed important aspects of formalizing employees' meal expenses.
According to him, despite the approval of the relevant regulations regarding employees' meal expenses in November 2024, the rules will apply to the meal expenses incurred by taxpayers in 2024, as determined by the decision: "Three forms of norms have been defined for the payment of employees' meal expenses: when the cost of the meal is paid directly to the employee, when meal preparation is provided by the employer, or when catering services are obtained from another taxpayer engaged in public catering.
When the meal cost is paid directly to the employee without cash, the compensation for the meal within the norm, according to Article 98.5 of the Tax Code, is not considered part of the employee's taxable income, and this income is not subject to income tax or mandatory state social insurance contributions.
If the meal cost paid to the employee exceeds the established norm, the excess portion is included in the employee's taxable income. This portion is subject to income tax and mandatory state social insurance contributions.
Moreover, if the provision of meals to employees is carried out by the employer itself or through a contract with catering service providers, the meal expenses incurred within the norm are considered deductible expenses for the employer.
If the expenses exceed the norm, meaning the employee benefits materially from it, regardless of whether the expenses are within or beyond the norm, they do not form taxable income for the employee."
Guliyev emphasized that, in general, meal expenses within or beyond the norm are social expenses not included in the composition of wages, and they are not subject to unemployment insurance contributions or mandatory medical insurance contributions.
He also added that if a non-cash payment is made for employees' meal expenses, the payment's purpose must specify that it is for meal expenses. If the employee's meal expenses are paid to a third party or meal preparation is provided by the employers themselves, the transaction is formalized in accordance with the rules established by the Tax Code, including an electronic invoice. In this case, the note section of the electronic invoice issued by the catering service provider must specify that the payment is for the meal expenses of the taxpayer's employees.