Situation: A company ABC SRL, VAT payer, offers employees subscriptions to a fitness room. Is VAT deducted related to the invoice received from the gym?
What is the tax treatment of these expenses?
Solution: According to Article 76 (3) of the Fiscal Code, advantages, in cash or in-kind, received in connection with an activity referred to in paragraphs (1) and (2), as well as those received from third parties as a result of a contractual relationship between Parties, with the exception of those provided for in paragraph 4, shall include, but are not limited to:
“b) accommodation, food, clothing, household chores, as well as other goods or services offered free of charge or at a lower price than the market price;”
Therefore, access to the gym provided free of charge by the employer is an advantage in kind.
According to Article 25 paragraph (2) of the Fiscal Code, salary expenses 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 advantage in the exposed situation is defined in Title IV of the Fiscal Code and does not belong to the category of those regulated in paragraph (3) and (4) of Article 25.
Therefore, the employer’s expense with the employees’ access to the gym is fully deductible when calculating the taxable profit.
We mention that, if an income granted to the employee falls within the social expense according to article 76 paragraph (4) letter a) of the Fiscal Code, from the point of view of the profit tax the employer’s expense is deductible within the limit of 5% provided in article 25 paragraph (3) letter b) of the Fiscal Code.
Article 25 paragraph (3) letter b) of the Fiscal Code establishes that the social expenses are deductible within the limit of 5%.
Thus, according to article 25 paragraph (3) letter b) of the Fiscal Code, the social expenses are deductible, within a limit of up to 5%, applied on the value of the expenses with the staff salaries, according to the Labor Code. The following falls under this limit:
- burial aids, aids for serious and incurable diseases, aids for childbirth, aids for prostheses, aids for losses produced in one’s own households, helping children in schools and placement centers;
- expenses for the proper functioning of some units under the administration of taxpayers, such as nurseries, kindergartens, schools, museums, libraries, canteens, sports facilities, clubs, non-family homes, and the like;
- expenditures representing: gifts in cash or in-kind, including gift vouchers offered to employees and their minor children, health services provided in case of occupational diseases and accidents at work until admission to a health unit, nursery vouchers granted by employer in accordance with the legislation in force, the value of tourist and/or treatment services, including transport, granted by the employer for its own employees and their family members, as well as the contribution to the intervention funds of the professional associations of miners;
- other social expenses incurred on the basis of the collective labor contract or of an internal regulation;
Therefore, what is not taxed to the employee with income tax based on article 76 paragraph (4) letter a) of the Fiscal Code must fall within the rate of 5%.
Articol 76 alineat (4) litera a) prevede astfel:
(4) The following income is not taxable, within the meaning of income tax: a) funeral aids, aids for serious and incurable diseases, aids for medical devices, aids for birth/adoption, aids for losses produced in one’s own households as a result of natural disasters, incomes representing gifts in cash and/or in-kind, including vouchers gift, offered to employees, as well as those offered for their minor children, the value of transport to and from the employee’s workplace, the value of tourist and/or treatment services, including transport, during the holidays, for employees and family members of theirs, granted by the employer for his own employees or other persons, as provided in the employment contract or in the internal regulations
The incomes of the nature of those provided above, made by natural persons, are not taxable either if these incomes are received based on special laws and/or financed from the budget, except for the holiday allowances granted according to the law.
In the case of gifts in cash and/or in-kind, including gift vouchers, offered by employers, income is non-taxable, provided that their value for each person, on each occasion, does not exceed 150 lei:
- gifts given to employees, as well as those offered to their minor children, on the occasion of Easter, Christmas and similar holidays of other religious denominations;
- gifts given to employees on the occasion of March 8;
- gifts offered to employees for the benefit of their minor children on the occasion of June 1.
The equivalent value of tourist and/or treatment services, including transport, during the holiday, for their own employees and their family members, granted by the employer, as provided in the employment contract, internal regulations, or received under special laws and/or financed from the budget, is non-taxable, insofar as their total value does not exceed in a fiscal year, for each employee, the level of an average gross salary used to substantiate the state social insurance budget for the year in which they were granted ;
Thus, in the situation in which advantages are granted to the employees, they represent income taxable to the employee and fully deductible for the employer.
From the VAT point of view, the company does not have the right to deduct for the VAT related to the services (access to the fitness room) purchased in favor of the employees, not being performed for the purpose of its economic activity, for carrying out operations that give the right to deduct VAT.
Provided that the company deducts VAT on the acquisition, the provision of services to employees is assimilated to the provision of services performed with payment in accordance with the provisions of Article 271 paragraph (4) of the Fiscal Code.
In this case, according to article 286 paragraph (1) letter d) of the Fiscal Code, the tax base of the value-added tax is the sum of the expenses incurred by the taxable person for these services. For this service, the company will issue a self-invoice in accordance with the provisions of article 319 paragraph (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 HG no. 1/2016).