Regulation of the Ministry of Public Finance (OMFP) no. 1802/2014 for the approval of the Accounting Regulations on the annual financial statements and the consolidated annual financial statements, as subsequently amended and supplemented, provides in paragraph 338 that amounts due and unpaid to the staff until the end of the financial year (annual holiday and other personnel rights) respectively any amounts to be received from it, relating to the current financial exercise but to be paid / received in the next financial year, shall be recorded as other debts and receivables related to the personnel
Annual holiday is recorded on account of debts when their amount is valued on the basis of salary or other documents justifying that amount.
In the absence of these, the amounts representing holidays are recognized on the basis of provisions.
If the employer has an exact calculation of the amounts of not consumed annual holiday, accompanied by supporting documents, such as the payroll, the accounting entry is:
641 „Expenses with personnel salaries” = 428 „Other debts and receivables in connection with the personnel”
When the payroll is drawn up during the month in which the employees take actually their holiday, the accounting entry is,
428 „Other debts and receivables in connection with the personnel” = 421 „Personnel – owed salaries”
At the same time, from tax perspective, this estimate for debt to personnel will be recognized as an expense with personnel and not as a provision expense, and can therefore be considered as deductible in the calculation of profit tax.
If the employer has no supporting documents regarding the amounts of the not consumed annual holiday, calculated on the basis of estimates made at the balance sheet date, he will record the related provisions and the accounting monography will be the following:
– at the end of the financial year:
6812 „Operating expenses regarding the povisions” = 1518 „Other provisions”
– at the time of granting of not consumed annual holiday:
641 „Expenses with personnel salaries” = 421 „Personnel – owed salaries”
1518 „Other provisions” = 7812 „Income from provisions”
From an accounting point of view, according to art. 369 of Order 1802/2014, a provision is created to cover debts whose nature is clearly defined and is likely to exist or is certain that they will exist but they have a high degree of uncertainty about value or the date they will appear.
In this respect, from the accounting point of view, the amounts owed to and paid to the staff (holidays and other personnel rights) should be recorded as other debts and claims in respect of staff and do not require the constitution of provisions, since they can be quantified in terms of the amount or timing of these amounts being paid to employees (either by the time that the employees will spend their not consumed annual holiday days or the termination of the employment contract).
The compensations for the not consumed holiday not until the end of the financial year are recorded on the accounts when debts can be credited on the basis of salary statements and other documents justifying that amount. Otherwise, in the absence of information on the amounts due for not consumed holiday, recognition may be made on the basis of provisions.
At the same time, from the tax perspective, the estimate made in respect of debts to personnel (staff) will be recognized as an expense with the staff and not as an expense with provisions, which can be considered deductible in the calculation of the corporate income tax.
In practice, the prudential approach that many companies choose is to make a provision for the amounts of not consumed holiday.
From the tax point of view, this provision is considered non-deductible since it is not included in the provisions for which the tax legislation in force grants full or partial deduction in accordance with art. 26 of the Fiscal Code.
In return, non-taxable income is considered to be the income to recover expenses for which no deduction has been made at the time they were incurred, such as income from the cancellation of provisions that were considered as non-deductible expenses at the date of their constitution.