On 01 February 2019, the Ministry of Finance rendered an opinion regarding the tax treatment of the reimbursement for the expenses for travel to and from work.
In this opinion, the Ministry emphasizes that the employer is obliged to document all the payments to the employees regarding reimbursement for the expenses for travel to and from work with an accounting document (monthly ticket for public transport, invoice for fuel, invoice for taxi services etc.). In case these payments are undocumented, they cannot be subject to Article 18 paragraph 1 point 1 of the Law on Individual Income Tax which stipulates that the salary tax shall not be payable for the reimbursement of the expenses of employee for travel to and from work up to RSD 3,914 per month.
In any case, the Ministry emphasizes that the payment regarding reimbursement for the expenses for going to and from work is not subject to VAT, regardless of whether the employer possesses the evidence that the employee actually used these funds for paying the expenses for travel to and from work.
Practical implications arising from this opinion are as follows:
- For the employer: having in mind that such payment, without accounting document, cannot be considered as documented within the meaning of the Law on Corporate Profit Tax, the employer would be obliged to pay corporate profit tax for such payment;
- For the employee: the income which the employee receives on this basis would be taxed as salary, in accordance with the Law on Individual Income Tax.