Work in the North
Persons working in the North have the right to receive state guarantees and compensation, which are established by the Labor Code of the Russian Federation, other federal laws and other legal acts of the Russian Federation (Article 313 of the Labor Code of the Russian Federation).
One of these guarantees is compensation for travel to and from the vacation destination. This right is established by Article 325 of the Labor Code of the Russian Federation. Employers located in regions of the Far North and areas equivalent to regions of the Far North are required to provide this guarantee to employees.
Compensation for shift workers for travel expenses along the route home - collection point - place of work: what about taxes
The Ministry of Finance considered an appeal regarding the procedure for assessing with income tax, personal income tax and insurance premiums the organization's expenses to reimburse the costs of shift workers for travel from home to the collection point, then to the place of work and back.
Income tax
According to paragraph 1 of Art. 252 of the Tax Code of the Russian Federation, expenses can be recognized as economically justified and documented expenses of the company.
According to subclause 12.1, clause 1, art. 264 of the Tax Code of the Russian Federation, the costs of transporting employees from their place of residence to work and back, companies working on a rotational basis can be classified as other. There is a condition - reimbursement of costs must be provided for in the collective agreement. When completed, these amounts can be included in labor costs.
Personal income tax
To release travel compensation amounts, it is necessary that, in accordance with paragraph 1 of Art. 217 of the Tax Code of the Russian Federation, payments were provided for by law. Guarantees and compensations for shift workers are established by Art. 302 Labor Code of the Russian Federation. Travel expenses are not included in this standard. Therefore, the employer will have to withhold personal income tax from this compensation.
True, in some cases, the journey from the collection point to the point where the work is performed has its own characteristics. For example, when, due to the transport inaccessibility of the facility, there is no other alternative than the delivery of workers organized by the employer himself. In these cases, the employee actually begins work duties at the gathering place in accordance with the internal labor regulations (ILR). That is, if the need for a collection point is due to specific working conditions and upon arrival at the collection point the employee is obliged to obey the PVTR, then the amounts of personal income tax compensation are not subject to personal income tax, since the employee does not gain economic benefit.
Insurance premiums
From the company’s appeal it follows that it compensated employees for travel from home to the collection point and back in accordance with local regulations in the amount of actual costs by rail and air transport. In the future, the organization planned to provide compensation in a fixed amount in accordance with the established limit.
In this regard, the department recalled that the object of taxation with insurance premiums, according to paragraphs. 1 clause 1 art. 420 of the Tax Code of the Russian Federation, are payments to employees within the framework of labor relations, except for the payments given in Art. 422 codes. Moreover, the list of these payments is closed. In paragraph 2 of Art. 422 of the Tax Code of the Russian Federation, among such non-taxable payments, legally established compensation is indicated. The concept of compensation provided to shift workers is described in Art. 302 Labor Code of the Russian Federation. This article does not include compensation for travel costs. However, if it is impossible to get to the place of work on your own by public transport, such costs may not be subject to contributions.
If we are talking about compensation for the cost of the route from home to the collection point and back, which does not fall into the category established by law, such payment must be subject to contributions in the usual manner.
Paying for travel on vacation
There are no specific rules for northerners paying for travel on vacation. Therefore, companies determine them independently.
The amount, conditions and procedure for compensation of expenses for payment of travel costs and baggage transportation to the place of use of the vacation and back must be specified in collective or labor agreements or in local regulations.
Please note: 2 years are counted in total from the date of commencement of work in the Far North and equivalent areas for all employers.
Expenses for paying the cost of travel to the place of vacation are not compensated if the employee is:
- on maternity leave;
- on parental leave until the child reaches the age of 3 years;
- on leave without pay;
- on annual paid leave followed by dismissal.
Personal income tax on compensation and reimbursements
Tax legislation exempts compensation amounts from personal income tax.
However, in some cases, it is still necessary to withhold “income” tax from such payments. The Ministry of Finance of Russia told our magazine about in what cases income needs to be withheld, and when such a need does not arise. The organization pays its employees the cost of travel by public transport to their place of work.
Are amounts of such payment subject to personal income tax? Full or partial payment for goods, works or services in the interests of employees is recognized as their income received in kind. Payment by an organization for travel of its employees fits this definition and also qualifies as their “in-kind” income. Accordingly, the cost of this payment is subject to personal income tax in the prescribed manner.
In this case, a caveat must be made: this rule is observed in the case when employees have the opportunity to get to their place of work on their own.
An employee uses his car for business purposes, for which the organization pays him compensation. To what extent are the specified amounts of compensation exempt from personal income tax? Does it matter that an employee drives a car under a power of attorney?
Compensation payments provided for by law, including those related to the employee’s performance of his job duties, are not subject to personal income tax. This is established by paragraph 3 of Article 217 of the Tax Code. This rule contains a significant clause that exemptions from taxation are provided for amounts “within the limits of the norm.”
Tax legislation does not define any rules regarding compensation when using an employee’s personal property for business purposes. The procedure for establishing them by the employer is also not specified. But similar information is available in labor legislation.
Thus, according to Article 188 of the Labor Code, when an employee uses personal property with the consent or knowledge of the employer and in his interests, the employee is paid compensation for the use, wear and tear (depreciation) of tools, personal vehicles, equipment and other technical means and materials belonging to the employee, as well as expenses associated with their use are reimbursed. The amount of reimbursement of expenses is determined by agreement of the parties to the employment contract, expressed in writing.
Thus, the amounts of compensation payments, including reimbursement of expenses in connection with the use of the employee’s personal property in the interests of the employer when performing his job duties in accordance with the agreement of the parties to the employment contract, are subject to exemption from personal income tax.
However, employee expenses related to the use of exclusively personal property in the interests of the company are subject to reimbursement. The Labor Code does not provide for reimbursement of costs associated with the use of property that does not belong to the employee.
Since a vehicle driven by an individual under a power of attorney is not his personal property, the provisions of paragraph 3 of Article 217 of the Tax Code do not apply in this case. Amounts of expenses reimbursed by the organization related to the use of such property in the interests of the employer are subject to personal income tax.
The employee, while on a business trip, used a taxi to travel from the airport to the hotel and back. These amounts were reimbursed by the organization. Are travel reimbursement amounts subject to personal income tax?
If an employee is sent on a business trip, the employer is obliged to reimburse travel expenses. In this case, the procedure and amount of reimbursement of travel expenses are determined by a collective agreement or local regulations of the organization.
Reimbursement of travel expenses is also not subject to personal income tax. When an employer pays expenses for business trips both within the country and abroad, income subject to taxation does not include, in particular, actually incurred and documented targeted expenses for travel to the destination and back, expenses for travel to the airport or train station at places of departure, destination or transfers, for baggage transportation.
Neither the Labor Code nor Article 217 of the Tax Code contain restrictions on the types of means of transport used by an employee to travel to and from their destination.
Thus, reimbursement of an employee’s expenses for a taxi on a business trip is one of the compensation payments related to the employee’s performance of work duties. On this basis, these amounts are exempt from personal income tax.
The company reimburses its employees for the cost of health resort vouchers for their children. Is income received exempt from taxation, given that in some cases children are adopted?
Income exempt from personal income tax includes, among other things, amounts of full or partial compensation (payment) by employers to their employees for the cost of vouchers for children under 16 years of age. We are talking about vouchers on the basis of which services are provided by sanatorium-resort and health-improving organizations located in Russia.
This norm contains a closed list of persons whose compensation or payment for the cost of vouchers is not subject to personal income tax. This list, among other things, includes family members of the organization’s employees, regardless of their age (including children), as well as children under the age of 16, regardless of their relationship with the organization’s employees.
Thus, amounts of compensation and payment for the cost of vouchers for adopted children of employees are exempt from personal income tax.
The organization rents vehicles - cars and buses with drivers. The lease agreement states that providing meals to the employees of the lessor organization is the responsibility of the tenant. Thus, the company provides the vehicle crew with food, the cost of which is then reimbursed to it by the rental organization. Which organization is the tax agent in relation to these incomes?
Payment by the employer for meals (both full and partial) is recognized as employee income received in kind. The tax base in this case is determined as the cost of meals.
Tax agents (they are the ones who withhold and transfer personal income tax) are those organizations from which or as a result of relations with which an individual received income. If the employees of the lessor organization receive income in kind in the form of payment for food for them by the lessee organization, the tax agent is the latter company, that is, the lessee.
By virtue of a court decision, the company reimburses the individual for legal expenses. Is it necessary to withhold personal income tax from the specified compensation?
Paragraph 3 of Article 217 of the Tax Code establishes an exhaustive list of compensation payments that are not subject to personal income tax. Payments made by an organization as compensation for legal expenses incurred by an individual are not included in the above list.
Consequently, such payments are subject to personal income tax in accordance with the generally established procedure.
Editorial Board of the magazine "Practical Accounting"
What about personal income tax?
For “northerners”, such payment for travel to the vacation destination and back is compensation provided for by law. Therefore, personal income tax does not need to be withheld from the entire amount of compensation for travel expenses.
However, this opinion is not shared by all officials of the Russian Ministry of Finance.
There is also such an opinion. Vacation is time when an employee is free from performing work duties and which he can use at his own discretion. That is, if an employee does not perform work duties during vacation, then he does not bear the costs associated with their performance. It turns out that the cost of travel to the place of rest and back during the vacation period of workers, paid by the employing organization, is not in its content a compensation payment and is subject to personal income tax in the general manner.
And the courts believe that compensation for travel expenses falls under paragraph 3 of Article 217 of the Tax Code of the Russian Federation and is not subject to personal income tax. But today there are no such provisions in the list of income exempt from taxation.
The employee was called back from vacation and compensated for travel expenses
The amount of payment (compensation) for an unscheduled flight (travel) of an employee from the place of vacation or back is fully subject to insurance contributions and personal income tax.
The Ministry of Finance is confident of this. In Letter No. 03-15-06/11330 dated February 21, 2019, the department answers the question of a company that had to call its director back from vacation for one working day. The company compensated the director for the flight from the place of rest to the place of work and back (after the director resolved the urgent issues for which he was needed).
The company was interested in: is this compensation subject to insurance premiums and personal income tax? According to the company, the payment was made for production purposes, and the work of the director (under an employment contract) is of a traveling nature, so it is possible to consider the payment exempt from personal income tax and contributions as compensation.
Officials explained that:
- The list of amounts excluded from taxation by insurance premiums, set out in Article 422 of the Tax Code of the Russian Federation, is closed and does not contain such an item as compensation for the employee’s travel from vacation to work or back. Thus, there is no reason to exclude the amount of tickets paid to the employee for such movements. Travel compensation should be fully covered by insurance premiums.
- Calling an employee back from vacation is possible only with the employee’s consent. At the same time, neither labor nor tax legislation contains a requirement for the employer to compensate the employee for travel expenses from vacation to work and back to vacation. That is, the director voluntarily interrupted his vacation, and the company voluntarily paid for his flight. Therefore, in this case we are not talking about any compensation exempt from personal income tax. Payment for such tickets is considered the income of the employee (whatever position and under whatever conditions he holds) and is subject to personal income tax on a general basis (Article 41 and Article 210 of the Tax Code of the Russian Federation).
