Expenses on a business trip – how to properly compensate

The organization sends an employee on a work trip solely to fulfill work obligations outside the territory of the main work activity specified in the contract. The maximum allowed period of stay on a business trip is limited to 30 days, except in cases when the management has agreed on a different duration of the trip.

Different categories of staff have their own characteristics of sending on a business trip. For example, employees go on business trips as part of an employment contract. And the trips of members of governing bodies (for example, members of the board of directors or the supervisory board) are arranged differently and regulated by separate legal acts.

Financial support for business trips

The financial costs incurred during the business trip are compensated to the employee on the basis of supporting documents. The legislation does not provide for restrictions on the amount of expenses to be reimbursed, except for the standard benefits for non-taxable daily payments.

The head of the organization makes an official decision defining the conditions for providing financial guarantees to employees, including the following points:

● destination;

● Duration of the trip;

● Purpose of the visit;

● the amount of compensation provided;

● Daily payments.

In the absence of an official order from the management or identified inconsistencies in the status of the trip for work purposes, the payments made qualify as tax obligations of the employer to the employee.

The funds received by employees as compensation for expenses are recognized as taxable salary income.

During internal business trips within the country, the employee is not entitled to receive cash payments exempt from taxation. However, full compensation is possible for all reasonable expenses incurred as a result of performing official tasks.

Examples of expenses incurred during a business trip:

● transportation services to the destination of the scheduled trip;

● accommodation in a hotel or other residential area;

● Vehicle parking and other related expenses.

The costs necessary for the successful fulfillment of the set goals, without which the fulfillment of the assigned task is difficult or becomes impossible, are considered justified.

Reimbursement of expenses for foreign business trips

Separate rules apply when sending employees on business trips abroad. For the first 15 days, a daily allowance of 75 euros is provided for tax exemption. This limit is valid for no more than two weeks during the month. Starting from day 16, the exemption amount is reduced to 40 euros daily.

Conditions for calculating daily allowances:

● One-time payment of daily payments in case of continuous movement between two business facilities on the same day.

● The possibility of calculating a single payment if borders between countries cross on the same day.

The daily allowance is paid if the distance from the place of the business trip exceeds 50 kilometers from the location of the employee’s workplace.

The daily allowance is paid as follows:

● The day of departure, if the transport crosses the border before 21 p.m.

● The day of return home, if the arrival of the transport back later than 3 a.m.

In addition to these provisions, transportation costs related to travel within the business zone are separately regulated. Expenses related to accommodation and travel during a business trip are exempt from taxation.

Use of personal vehicles

The use of an employee’s own vehicle is possible if the organization confirms the expediency of such a method of transportation with documentation. Reimbursable expenses include fuel charges, service fees, and other direct costs incurred as a result of operating the vehicle.

Compensation can be carried out in one of the ways:

● according to the actual confirmed documents of expenses;

● without presenting documents, based on the established maximum of tax-free compensation.

The maximum amount of compensation applied by the organization is limited to 550 euros per month. Expense accounts are accounted for separately by each head of the company.

Additional types of costs

Reimbursable expenses in addition to the above categories may include:

● purchase of public transport tickets;

● Travel insurance;

● processing of visa documents;

● Car rental abroad;

● Payment for parking, taxi services and baggage transportation;

● Currency exchange differences and other similar payments.

These expenses must be confirmed by appropriate financial documents.

Expenses incurred by staff outside the framework of an official business trip are not taken into account and are not considered as justified production costs.

Procedure for reimbursement of expenses during business trips abroad

When a situation arises related to foreign monetary transactions, there are three options for the reimbursement procedure:

● Based on the officially established rates of the Eurocentrobank on the date of the transaction.

● According to the official rates of the Eurocentrobank on the next business day after the payment is made.

● Based on actual expenses recorded by bank payslips.

The latter scheme assumes the possibility of refunding funds without additional conversion according to established financial standards.

Special cases: referral of members of the governing bodies of organizations

The legislation provides for separate rules for business trips of representatives of executive bodies of legal entities (directors, regulatory authorities and auditors). So, for seconded managers, special approaches are possible to create conditions for financial coverage of their activities.

Despite the similarity of the norms concerning the general concept of business trips, the registration procedure and the amount of possible payments to members of management structures differ from the general standards. For example, employees are required to comply with the terms of an employment contract, while managers are not bound by such obligations.

In particular, daily payments for members of the management staff are not subject to mandatory payment by legal entities, but may be provided for by a separate agreement between the parties. It is important to note that possible payments to the management of companies are limited by the same rules as for ordinary employees.

Thus, the procedure for reimbursement of expenses to persons who are part of the governing bodies of enterprises is determined individually and fixed by a special decision of the relevant legal entity.

Summarizing

The information provided makes it possible to effectively organize the process of sending employees, minimizing the risks of tax violations and optimizing the company’s financial flows.