Pursuant to subsection 1 of § 48 of the Income Tax Act, employers pay income tax on fringe benefits granted to employees.
Based on clause 7 of subsection 1 of § 2 of the Social Tax Act, social tax is paid on fringe benefits within the meaning of the Income Tax Act, expressed in monetary terms, and on income tax payable on fringe benefits.
Declaration
The period of taxation of fringe benefits is one calendar month. The employer declares the fringe benefits granted to employees and income and social tax calculated on fringe benefits during a calendar month in Annex 4 of the form TSD, which must be submitted together with the form TSD to the Tax and Customs Board by the 10th day of the month following the calendar month in which the fringe benefit was granted. The tax amount is paid to the bank account of the Tax and Customs Board by the same date at the latest.
Legal basis
Handbook - taxation of fringe benefits
The content of the handbook opens from the menu below. Click on the arrow symbol to display the subtopics.
Work clothes
An employer is required to provide, at the employer’s expense, an employee with personal protective equipment, special work clothes, and cleaning and washing means if the nature of the work so requires, and arrange training for the employee in the use of personal protective equipment (clause 11 of subsection 1 of § 13 of the Occupational Health and Safety Act).
Thus, work clothes, protective clothing and personal protective equipment provided by an employer are not considered to be a fringe benefit for the purposes of the Income Tax Act in a situation where, due to the nature of performance of work, it is necessary to wear the required work clothes in the performance of the duties.
As a rule, suitable clothing based on the nature of work is deemed to be work and protective clothing, which also considers the safety of work.
Employers must provide dressing rooms for employees wearing work clothes and must also provide a rooms for warming up and drying room for clothes to employees working outdoors (subsection 3 of § 11 of the Occupational Health and Safety Act).
If an employer establishes rules to its employees regarding wearable clothing at work (for example, employees must attend clients in respectful clothing) which cannot be regarded as the above-mentioned work or protective clothing, the employer must take into account the tax liability. If the employer reimburses the costs of acquiring the so-called respectful clothing or pays for it, then it is considered the employer providing the employee with a financially valuable benefit, which is treated as a fringe benefit according to subsection 4 of § 48 of the Income Tax Act.
If, for example, the employer prescribes uniform, so-called corporate clothing (formal suits, blouses, vests, shoes, etc.) for employees working in service halls, salons, etc., which is generally used at work, but which employees can also use outside of working hours, then taxation must be based on the principles set out in subsection 3 of § 32 of the Income Tax Act.
This means that the employer must determine the proportion of use of work clothes in business and personal consumption. If the employee pays for the part of personal consumption, there is no tax liability. If the employer pays for it, it is a fringe benefit. If the employer ensures that such clothing is only used at the place of work (employees change their clothes to work clothes before starting work and after the end of working time), there is no tax liability.
Last updated: 18.05.2023
Last updated: 09.04.2024