Tax Alert, February 2019.

Ministry of Finance has published Ruling no. 011-00-12/2019-04 regarding the tax treatment of reimbursement of costs for commuting to and from work.

Namely, Ministry of Finance has taken a stance that reimbursement of commuting costs to and from work needs to be properly documented with credible accounting documents, in order for such costs to be deductible as expenses, in line with the Corporate Income Tax Law. Otherwise, expenses would be considered as non-documented in accordance with the Article 7a item 1.

Additionally, it is an interpretation of the Ministry of Finance that Article 18 paragraph 1 item 1 of the Personal Income Tax Law can be applied only if the expenses are documented.  

The Rulings provides examples of credible accounting documents - bills for monthly public transportation ticket, daily ticket, one-way ticket, gasoline if the employee is using its personal vehicle, etc.

With this Rulings Ministry of Finance has changed its existing interpretation that reimbursement of expenses up to the level of non-taxable amount does not need to be supported with invoices/bills (Ruling of the Ministry of Finance no. 011-00-712/2016-04 issued on 13 February 2017, where it has been stated that employers do not have the obligation to provide supporting documents for reimbursement of expenses via per diems, in case the amount of per diem does not exceed the non-taxable threshold, as set by the Personal Income Tax Law).