Having a cup of Cup-a-Soup at the office is often quite common. Just like an apple, a chocolate bar or a croquette, this cup of soup is classified for tax purposes as a small refreshment. A portion of chips with a snack, or two filled rolls, are, by contrast, regarded as a meal. Different tax rules apply to these two categories.
In this article, we outline the tax implications for payroll taxes (under the work-related expenses scheme), VAT, income tax (for the business owner) and corporation tax (for, for example, a director and major shareholder).
Snacks at the workplace
A cup of soup – that is, the small refreshment provided by the employer to their employee during working hours – is exempt from payroll tax (deemed to have zero value under the WKR). The employer may therefore provide their staff with small refreshments free of charge. Drinks served immediately after working hours at the workplace may also be provided tax-free.
Expenses relating to light refreshments are deductible from profit for the purposes of income tax and corporation tax up to 73.5%. Alternatively, all such expenses may be deducted to the extent that they exceed the threshold of €4,500.
Tax-free meals: business meals / business lunches / business dinners
Business meals are exempt from income tax (a specific exemption under the WKR). A meal is considered a business meal if it forms part of temporary accommodation expenses. This includes, amongst other things, a business lunch or dinner consumed during a meeting with a client.
Even if a meal has more than a merely incidental business purpose, such meals are exempt from payroll tax. This is certainly the case when healthcare staff join in therapeutic meals and when an employee is unable to eat at home between 5.00 pm and 8.00 pm due to work commitments, for example because of overtime or late-night shopping.
The same restriction applies to deductibility for income tax and corporation tax as for minor consumption at the workplace.
Tax-free food: meals from the staff canteen
For meals from the company canteen, a standard amount of €3.25 per meal must be used for income tax purposes. This amount applies to breakfast, lunch and dinner. The employer only needs to keep a record of how many meals are provided. Any contribution made by the employees may be deducted from the total amount.
VAT
For VAT purposes, expenditure relating to staff benefits is only deductible if the annual expenditure per employee does not exceed €227 (excluding VAT). Staff benefits include, amongst other things, Christmas hampers, anniversary gifts, refreshments and meals. A separate calculation is required to determine the benefit to staff arising from the provision of food and drink. calculation method. This method essentially involves adding a percentage of 25% to the actual purchase cost of the food and drink, and then deducting any allowances paid by staff from this amount. If the resulting amount is positive, it must be divided by the number of employees. The resulting amount is the benefit per employee. If the benefit in the form of food and drink exceeds €227, the input tax deducted must be adjusted.
VAT on food and drink consumed in a catering establishment is not eligible for deduction.
Enjoy your meal!