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VAT refund on meal expenses when purchased via e-invoice
VAT refund on meal expenses when purchased via e-invoice
According to the amendments made to the Tax Code, meal expenses are allowed to be deducted from income within the norms and procedures established by the Cabinet of Ministers. But how should the value-added tax (VAT) paid on such expenses be reclaimed?
Tax expert Javid Velizade clarifies this issue.
By the Decision No. 492 of the Cabinet of Ministers dated November 22, 2024, the “Norms and Procedure for Deducting from Income for Taxation Purposes the Representation Expenses, Housing and Meal Expenses of Employees, as well as Expenses Related to the Provision of Therapeutic-Prophylactic Meals, Milk and Other Equivalent Products and Means to Employees Working in Harmful, Hard and Underground Working Conditions” were approved. According to the Procedure, the daily deductible norm per employee for meal expenses is set at 5 (five) manats if the meal cost is reimbursed directly to the employee, if the catering is provided by the employer, or if the service is obtained from another taxpayer engaged in public catering activities. Additionally, if the meal reimbursement is made in a cashless manner directly to the employee, it is also included in deductible expenses.
Taking into account that the amendments to the Tax Code came into force on January 1, 2024, from that date taxpayers may deduct meal expenses from income within the prescribed norms in accordance with Article 119.2 of the Code. According to Article 175.1 of the Tax Code, unless otherwise provided, the VAT amount paid at the time of acquiring goods (works, services) for VAT-taxable operations may be credited if the operation amount is paid from the purchaser's bank or other payment account to the supplier’s bank or other payment account, and the VAT amount is paid into the VAT deposit account. Furthermore, according to Article 175.3 of the Tax Code, the expenses specified in Article 119.2 of this Code are allowed to be credited for VAT purposes.
Example: A company had 100 employees in the month of May. It purchased meals for its employees from a company operating in the catering service sector, with a daily meal cost of 7 manats per employee. Thus, for 22 working days in May, the company incurred VAT-exclusive meal expenses of 15,400 manats:
(100 x 7) x 22 = 15,400 manats.
In the following month, the company paid 15,400 manats to the supplier’s bank account and 2,772 manats to the VAT deposit account. The amount of VAT to be credited by the company in June should be calculated as follows:
(100 x 5) x 22 = 11,000 manats;
11,000 x 18% = 1,980 manats.
As noted above, in this case, the daily deductible norm per employee for meal expenses is set at 5 manats. Therefore, out of the 2,772 manats in VAT paid, the company may only credit 1,980 manats.
According to the amendments made to the Tax Code, meal expenses are allowed to be deducted from income within the norms and procedures established by the Cabinet of Ministers. But how should the value-added tax (VAT) paid on such expenses be reclaimed?
Tax expert Javid Velizade clarifies this issue.
By the Decision No. 492 of the Cabinet of Ministers dated November 22, 2024, the “Norms and Procedure for Deducting from Income for Taxation Purposes the Representation Expenses, Housing and Meal Expenses of Employees, as well as Expenses Related to the Provision of Therapeutic-Prophylactic Meals, Milk and Other Equivalent Products and Means to Employees Working in Harmful, Hard and Underground Working Conditions” were approved. According to the Procedure, the daily deductible norm per employee for meal expenses is set at 5 (five) manats if the meal cost is reimbursed directly to the employee, if the catering is provided by the employer, or if the service is obtained from another taxpayer engaged in public catering activities. Additionally, if the meal reimbursement is made in a cashless manner directly to the employee, it is also included in deductible expenses.
Taking into account that the amendments to the Tax Code came into force on January 1, 2024, from that date taxpayers may deduct meal expenses from income within the prescribed norms in accordance with Article 119.2 of the Code. According to Article 175.1 of the Tax Code, unless otherwise provided, the VAT amount paid at the time of acquiring goods (works, services) for VAT-taxable operations may be credited if the operation amount is paid from the purchaser's bank or other payment account to the supplier’s bank or other payment account, and the VAT amount is paid into the VAT deposit account. Furthermore, according to Article 175.3 of the Tax Code, the expenses specified in Article 119.2 of this Code are allowed to be credited for VAT purposes.
Example: A company had 100 employees in the month of May. It purchased meals for its employees from a company operating in the catering service sector, with a daily meal cost of 7 manats per employee. Thus, for 22 working days in May, the company incurred VAT-exclusive meal expenses of 15,400 manats:
(100 x 7) x 22 = 15,400 manats.
In the following month, the company paid 15,400 manats to the supplier’s bank account and 2,772 manats to the VAT deposit account. The amount of VAT to be credited by the company in June should be calculated as follows:
(100 x 5) x 22 = 11,000 manats;
11,000 x 18% = 1,980 manats.
As noted above, in this case, the daily deductible norm per employee for meal expenses is set at 5 manats. Therefore, out of the 2,772 manats in VAT paid, the company may only credit 1,980 manats.