The list of travel expenses that are reimbursed to the employee and are not subject to personal income tax and the military levy is clearly defined in clause 170.9.1 of the TCU.
This list includes mandatory insurance expenses. Such expenses shall be confirmed by the originals of the relevant documents and be related to the business activities of the enterprise. For each type of insurance, it is necessary to determine whether it can be classified as mandatory.
The most common types of insurance, the cost of which is paid:
- on business trips in Ukraine — personal insurance against transport accidents; tourist insurance (medical and accident insurance);
- on business trips abroad — medical and accident insurance; civil liability insurance for land vehicle owners.
Transport Accident Insurance
If an employee uses passenger transport on a business trip in Ukraine, one cannot avoid personal insurance against transport accidents. After all, this type of insurance is mandatory according to clause 6, Article 7 of Law No. 85.
The procedure for carrying out such insurance in relation to passengers of railway, sea, inland water, automobile and electric transport, except for internal urban transport, during a trip or stay at a railway station, port, station, pier is established by Regulation No. 959. According to its norms, passengers are considered insured from the moment of declaring boarding the vehicle until the end of the trip.
The insurance payment for mandatory personal insurance against accidents on transport is deducted from the passenger by the carrier. The carrier acts on behalf of the insurer for remuneration based on the contract of assignment.
The carrier acting as the insurer’s agent issues an insurance policy to each insured person. It can be issued either on a separate form or placed on the back of the ticket, where the amount and amount of insurance are indicated. Most often, it is a transport ticket that is a document confirming not only travel expenses, but also the cost of personal insurance against transport accidents.
Since personal motor accident insurance is mandatory, no taxable income arises for the employee on reimbursement of the costs of such insurance.
There are no grounds for withholding personal income tax and military levy. We do not charge USC due to the fact that any travel expenses are not included in the salary fund according to clause 3.15 of Instruction No. 5. Clause 6, Section I of List No. 1170 confirms it, which determines payments from the employer that are not subject to USC.
Health Insurance for Business Trips Abroad
Paragraph “a”, clause 170.9.1 of the TCU stipulates that if the laws of the country of business trip or the countries through which transit is carried out provide for mandatory insurance of the life or health of the person who is sent or their civil liability (in case of a business trip by car), then expenses for such insurance upon reimbursement shall not be included in the taxable income of the person who is sent on a business trip.
So, if purchasing a health insurance policy is mandatory for a business trip abroad, the cost of purchasing it can be compensated to the employee without withholding personal income tax, military levy and USC accrual.
If health insurance for entering a foreign country is not mandatory, then the employee shall not be entitled to compensation for its cost. You can confirm that health insurance is mandatory by using the list of documents required to enter a particular country. Such a list is usually provided on the website of the country’s embassy in Ukraine.
Automobile Liability Insurance when Travelling Abroad
If you are planning a business trip abroad by a company’s vehicle, please note that according to Article 16 of Law No. 85, in case of departure of a motor vehicle registered in Ukraine to the territory of another member country of the International Auto Insurance System “Green Card”, the owner of such a vehicle must:
- conclude an agreement of international compulsory civil liability insurance for land vehicle owners, which applies to these countries;
- get from the insurer — a full member of the Motor (Transport) Insurance Bureau a “Green Card” insurance certificate of a single sample, which is accepted in all member countries of this international insurance system.
Control over the availability of the “Green Card” certificate is entrusted to the Border Guard Service.
Thus, if a business trip is carried out using the company’s vehicle to the member countries of the “Green Card” auto insurance system, the purchase of a “Green Card” insurance policy is mandatory. Compensation for the cost of purchasing the “Green Card” is not the employee’s taxable income and the base for calculating USC.
Please be careful! If an employee leaves for a business trip abroad in their own car, which was not leased or borrowed by the employer, then if the employer compensates for the costs of purchasing a “Green Card” certificate, the employee will have income subject to personal income tax and military levy. In addition, the amount of such compensation will be the basis for calculating USC as a component of salary (clause 2.3.4 of Instruction No. 5).
Insurance in the Advance Report
If the insurance under which expenses were incurred on a business trip is mandatory, when such expenses are reimbursed, the employee shall not have any taxable income. To compensate an employee for the costs of compulsory insurance on a business trip, original supporting documents and the presence of a link between such expenses and the economic activities of the enterprise shall be required.
Driver Insurance
Personal insurance against transport accidents shall be mandatory insurance provided for by clause 6, Article 7 of Law No. 85. This type of insurance is mandatory only for drivers-employees of transport companies directly engaged in transport operations (clause 1 of Regulation No. 959).
The determination of whether enterprises belong to transport companies is given in Article 6 of the Law on Transport. Thus, transport companies are considered to transport passengers, cargo, baggage, mail and provide other transport services.
Drivers must be insured by legal entities or individual entrepreneurs who own or operate vehicles and have concluded insurance contracts with the insurer (clause 4 of Regulation No. 959). Drivers are considered insured only for the duration of the trip service (clause 2 of Regulation No. 959).
This is established in clause 165.1.5 of the TCU and subclause 1.7, clause 161, Sub-section 10, Section XX of the TCU. In Section I of Tax Calculation 4DF, it is necessary to reflect the amounts of such insurance premiums with the income attribute “132”.
If the company does not belong to transport companies, then drivers’ insurance will be provided voluntarily.
At the same time, the insured person will have taxable income (personal income tax at the rate of 18%, military levy at the rate of 1.5%). In Section I of Tax Calculation 4DF, it is necessary to reflect income with the income attribute “124”. It is also necessary to take into account the non-monetary nature of such income and apply a natural coefficient of 1.219512 when calculating personal income tax. However, the military levy must be deducted from the “net” value of insurance.
In addition, the amount of insurance premiums for voluntary driver insurance will be the basis for calculating USC. After all, it is included in the salary fund (clause 2.3.4 of Instruction No. 5).
In accounting, the amounts of insurance premiums under insurance contracts must be included in the corresponding expenses (National Accounting Regulations (Standards) 16). Transport companies must reflect such amounts as part of general production expenses on account 91 (clause 15.7 of National Accounting Regulations (Standards) 16). If insurance premiums are paid for a long period, it is necessary to account for them as deferred expenses in account 39, and then in each month of validity of the insurance contract, write off the amounts from account 39 to the expenses of the reporting period.