Explanation from Financial Chain Corporation’s Tax and Legal Expert - FChain

According to amendments to the Tax Code effective January 1, 2024, meal expenses for employees may be deducted from taxable income in accordance with the norms and procedures established by the Cabinet of Ministers. At the same time, VAT paid on these expenses can be reclaimed in accordance with the relevant provisions of the Tax Code.

1. Regulatory Framework

• Under Decision No. 492 dated November 22, 2024, the “Norms for deducting representation expenses, accommodation, and meal expenses for employees…” from taxable income were approved.
• According to these regulations, the daily allowance for employee meal expenses—whether paid directly to the employee via cashless transfer or through a catering service provider—is set at AZN 5 per employee.

2. VAT Reimbursement

• Pursuant to Article 175.1 of the Tax Code, the VAT paid on the purchase of goods (works, services) subject to VAT is reimbursed when the VAT amount is transferred from the buyer’s bank account to the supplier’s bank account, and the VAT portion is credited to a designated deposit account.
• Under Article 175.3, expenses listed in Article 119.2—including meal expenses—qualify for VAT reimbursement.

3. Practical Example

In April, an enterprise employing 100 workers procures meals from a catering company at AZN 7 per employee per day. Assuming 22 working days in the month, the total expense is calculated as follows:

(100 employees × AZN 7) × 22 days = AZN 15,400 (excluding VAT).

The VAT portion of this amount (18 %) transferred to the deposit account is AZN 2,772. However, under the approved norm, the deductible meal expense is limited to AZN 5 per employee per day:

(100 employees × AZN 5) × 22 days = AZN 11,000,

and the VAT on this deductible portion (18 %) is AZN 1,980. As a result, the enterprise can reclaim only AZN 1,980 of the AZN 2,772 VAT paid.

4. Recommendations

To ensure proper deduction of meal expenses and reclamation of the associated VAT:

1. Carefully adhere each month to the number of employees and the daily normative amount.
2. Distinguish and document bank payments and deposit transfers.
3. If needed, contact Financial Chain Corporation’s experts for legal support throughout the deduction and VAT reimbursement processes.

— Financial Chain Corporation, Tax & Legal Expert