The obligation to provide evidence for commuting costs that was introduced last year, first through the opinion of the Ministry of Finance on interpretation of tax regulations in February and subsequently by amendment to the Law on Income Tax of December 2019, was neither welcomed by employees nor by employers.

Instead of receiving reimbursement for commuting to and from work that was provided by the Labour Law without any additional requirements, employees have to prove the amount of commuting costs by providing relevant evidence (prepaid ticket, fuel receipt etc.). On the other hand, the obligation to document costs also burdened the employers due to further administration that it entails.

It is therefore not unusual that many have welcomed the news published a few days ago on one of the portals, stating that the obligation to document the cost of commuting was abolished. The news read that “On 3 June, the Ministry of Finance passed a recommendation according to which the cost of commuting that was not documented by relevant authentic document shall be recognised as expense in tax balance, in accordance with the Law on Corporate Income Tax”.

However, the information published on the portal was not complete, hence it was not accurate.

Namely, the Ministry of Finance noted in its opinion of 3 June that, if reimbursement of cost of commuting to and from work is not supported by relevant authentic accounting document, while such reimbursement is subject to 10% income tax rate, such reimbursement can be acknowledged as expenditure in tax balance for the tax period of its payment.

In other words, when the employer does not possess a document to justify the payment of commuting cost to the employee, wherefore it paid the appropriate income tax since no conditions were fulfilled for exempting such cost from taxation, the cost concerned can nevertheless be recognised as expenditure in tax balance for the purpose of establishing profit tax. Therefore, the portal failed to note a very significant fact that the employer had paid income tax for commuting costs, which would not be obligatory had the employee provided relevant evidence.

In this opinion, the Ministry did not depart from its original position that the cost of commuting has to be documented, and now it cannot even do so having in mind that the law of December 2019 explicitly prescribed that the reimbursement of documented cost of commuting to and from work shall not be subject to income tax.

Although such approach can certainly be subject to several objections, including that such position contravenes court practice in labour disputes, it is certain that the obligation to prove the cost of commuting remains in force, at least until the next legal amendment.

This article is to be considered as exclusively informative, with no intention to provide legal advice.
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