According to the Tax Code of Ukraine adopted by the Ukrainian Parliament on 02 December 2010 (the “Tax Code”), the maximum tax deductible per diem allowances payable to employees sent on business trips will be increased significantly starting from 01 April 2011.
According to the applicable legislation, per diem allowances are paid to an employee sent on business in addition to other connected costs covered by the employer (e.g. hotel and travel expenses).
The Tax Code increases the maximum amounts of the per diem allowances that may be included within the gross expenses of the employer and that are not subject to the employee’s personal income tax. The new tax-deductible maximums for per diem allowances will be fixed at the following levels:
- for business trips within Ukraine - 0.2 of the statutory monthly wage, effective as at 01 January of the relevant year (i.e. for the year 2011 UAH 188.2 or approx. Euro 18); or
- for business trips outside of Ukraine – 0.75 of the statutory monthly wage, effective as at 01 January of the relevant year (i.e. for the year 2011 UAH 705.75 or approx. Euro 66).
Employers are not prevented from paying per diem expenses at a level that exceeds the aforementioned amounts however, if this is the case, sums paid in excess of the allowances will not be tax-deductible.
Pursuant to the provisions of the Tax Code, the aforementioned maximum levels of tax-deductible per diem expenses are applied to all employees except for (i) state employees and (ii) crew members of crafts. Instead, the daily allowances payable to employees falling within these two categories have been set by the Cabinet of Ministers of Ukraine in its Regulations No.98 and No.73, both dated 02 February 2011.
Currently, the maximum amounts of the daily allowances are set by the Regulation of the Cabinet of Ministers of Ukraine “On norms of reimbursement for business trips within Ukraine and abroad” No.663, dated 23 April 1999 (the “Regulation 663”), which will cease to be in force as of 01 April 2011.
It should be noted that apart from current norms for daily allowances, Regulation 663 also regulates some other matters related to the sending of employees on business travels (e.g. maximum permitted time periods, procedures for payment of allowances to employees dispatched on business, etc.). Neither the Tax Code, nor the newly-adopted regulations of the Cabinet of Ministers of Ukraine No.98 and No.73 provide for regulation of these other matters in respect of employees of private entities. Therefore, starting from 01 April 2011 the privately–owned employers will be allowed to regulate all such matters internally, subject to new regulations being adopted in this regard by the respective state authorities.