29.01.05

Thanks to Gazprom all Russian companies may now reimburse their employees any amount for business trip expenses  without subjecting them to income tax. The Arbitration Court nullified a letter of Tax Ministry, which required collecting income tax from daily business trip expenses in excess of 100 rubles (Vedomosty).

According to the Tax Code, business trip expenses are not to be subject to personal income tax as long as the amounts are within the norms set by tax legislation.

However, tax legislation doesn't establish any norms for daily business expenses, nor the procedure for calculating income tax related to them. According to the Tax Code chapter on “Profit tax,” the company can write off (reducing profit tax) expenses for business trips if the amount is within the norms set by governmental regulations. According to the regulation in 2004, employees may be allotted 100 RUR per day for meals on domestic business trips. In the USA this sum is $62, in Germany – $58.

In February the Tax Ministry sent a letter to the tax inspectorates, according to which the norms for profit tax must also apply to income tax. This means that if an employee spent more than 100 RUR per day, when he recieves compensation for the business trip, he should pay 13% income tax on the excess.

Gazprom did not like this letter. In 2002 the company approved an order to pay their employees 200 RUR per day while they on domestic business trips, and 350 RUR per day when the travel is to Moscow or St. Petersburg. When the tax authorities attempted to fine Gazprom for not paying the income tax on the higher expenses, Gazprom went to court.

According to Gazprom, the Tax Ministry exceeded it’s authority by applying the norms of one chapter of the Tax Code to another chapter. Moreover, "profit" to a taxpayer is that which brings him personally economic benefit. An employee takes a business trip in the interests of the company.  The Supreme Arbitration Court considered these arguments and on January 19 nullified the letter of the Tax Ministry.

Experts believe Gazprom's persistence will improve the system of business trip compensation. The Tax Code also contains uncertainty concerning compensation for the use of mobile phones and cars in the interests of the company. In this particular case, the judgment of the Supreme Arbitration Court changed the situation in favor of the taxpayers.