Situation:
A manager with a mandate contract, travels in the country, in the interest of the company. What is the tax treatment given to him?
Solution:
The daily allowance is a right of the employees due during the delegation / secondment as provided in art. 44 paragraph (2) and art. 46 paragraph (4) of the Labor Code.
Also, the Fiscal Code establishes the fiscal treatment of the daily allowances of administrators and managers in a similar way to employees, but not for associates.
Thus, art.76 paragraph (4) letter j) of the Fiscal Code stipulates that it does not represent taxable income, allowances and any other amounts of the same nature, received during the trip, in another locality, in the country and abroad, in the interest carrying out the activity, as provided in the legal report, by the administrators established according to the constitutive act, the administration / mandate contract, by the managers who carry out their activity based on the mandate contract according to the law, by the members of the management from the companies managed dualist and of the supervisory board, according to the law, and by the managers, based on the management contract provided by law, within the limit of the non-taxable limit established at paragraph (2) let. m), as well as those received to cover transport and accommodation expenses.
The limit provided in par. (2) let. m) is the following:
- a) in the country, 2.5 times the legal level established for the indemnity, by a decision of the Government for the staff of public authorities and institutions;
- b) abroad, 2.5 times the legal level established for the daily allowance by Government decision for the Romanian personnel sent abroad for the accomplishment of some temporary missions;
The non-taxable daily limit is granted only if the duration of the trip is longer than 12 hours, considering every 24 hours a day of travel in the interest of carrying out the activity.
As can be seen in the mentioned legal provisions, the daily allowance and any other amounts of the same nature must fall within the limit of 2.5 times the level established for public institutions in order not to be taxed, except for transport and accommodation expenses. Amounts of the same nature may include the table served by the manager.
Given the above, the manager can benefit from:
– either per diem and table not taxable so that the two are cumulated to fall within the limit of 2.5 times the level established for public institutions;
– only for the non-taxable daily allowance within the limit of 2.5 times the level established for public institutions;
– only of non-taxable mass within the limit of 2.5 times the level established for public institutions.
Amounts that exceed the limit of 2.5 times the level established for public institutions represent taxable and taxable income with social contributions.
At the same time, the quoted text stipulates that the daily allowance and any other amounts of the same nature are not taxable, the limit of 2.5 times the level established for public institutions, as provided in the legal report.
Therefore, the choice of one of the above modalities must be expressly provided in the management contract.
From the point of view of the profit tax, the employer’s expense with the manager’s meal / daily allowance is fully deductible based on art. 25 paragraph (2) of the Fiscal Code.
According to art.25 paragraph (2) of the Fiscal Code, the expenses with salaries and those assimilated to salaries as defined according to title IV are deductible expenses for determining the fiscal result, except for those regulated in paragraphs (3) and (4). Thus, the text stipulates that the expenses with the salaries defined according to title IV are deductible expenses and at art. 76 paragraph (4) letter j) of the Fiscal Code are mentioned the daily allowance and any other amounts of the same nature.
The value added tax is deductible for the acquisitions made for the benefit of the operations mentioned in art. 297 paragraph (4) of the Fiscal Code. The company does not have the right to deduct the value added tax related to the acquisitions of the meals offered free of charge to the manager, as they are not used for carrying out operations from those provided by art. 297 of the Fiscal Code.
If VAT is deducted upon their acquisition, the granting of meals is assimilated to a delivery of goods made with payment in accordance with the provisions of art. 270 para. (4) lit. b) of the Fiscal Code. In this case, according to art.286 paragraph (1) letter c) of the Fiscal Code, the basis for taxation of value added tax is the purchase price of the products and the company will issue a self-invoice in accordance with the provisions of art. 319 para. (8) of the Fiscal Code.
Legal basis:
– Fiscal Code (approved by Law no. 227/2015, published in the Official Gazette no. 688 of 10.09.2015), with subsequent amendments and completions;
– Fiscal Procedure Code (approved by Law no. 207/2015, published in the Official Gazette no. 547 of 23.07.2015), with subsequent amendments and completions;
– Methodological Norms for the application of the Fiscal Code (approved by GD no. 1/2016);
– Labor Code, with subsequent amendments and completions.