For many years, meal vouchers have been one of the tax-advantaged ways to contribute to employees’ meals. However, payroll accountants often must dispel some of the misconceptions that employees have about meal vouchers. Let’s look at the most common ones in this short article.
Misconception 1: Meal voucher must not be provided for a day when the employee did not work (e.g. due to taking a vacation).
Misconception 2: A meal voucher can only be provided for a day in which the employee worked at least 3 hours.
Misconception 3: No meal vouchers can be provided to an employee who is on notice/probation period.
Meal vouchers are an (optional) benefit, so it is up to the employer to decide under what conditions and in what amounts he will provide meal vouchers. It is therefore not true that the employer can only provide the number of meal vouchers corresponding to the shifts worked. Nor is it logically necessary that a minimum number of hours must be worked in a shift.
In theory, an employer may decide to provide each employee with more meal vouchers each month in addition to their wages than there is the number of working days in that month, whilst the face value of one meal voucher may be higher than average. And not only that. The Income Tax Act has no limit on the exemption of meal vouchers on the employee’s side. Thus, the entire value of all meal vouchers will be exempt from tax, even though the total amount will be relatively higher.
So why don’t vast majority of employers provide meal vouchers for days not worked or provide a larger contribution? While there is no tax exemption limit on the employee’s side in payroll, the employer is limited by law in terms of tax exemption. In order to be able to deduct the cost of the meal voucher from the income earned (and thus not pay 19% tax), the meal voucher must be provided for a shift in which the employee worked at least 3 hours, and at least 45% of the value of the meal voucher must be paid by the employee (usually “paid” by payroll deduction).
Because of these limits, employers usually provide meal vouchers under the above conditions, however they are not bound by law or other regulation to do so. If employers choose to provide meal vouchers on terms more favorable to employees, they may do so. They only have to take into account a lower tax deductibility rate on their side.
The notion that meal vouchers cannot be provided to employees on notice or during their probationary period is completely false, since no such condition is specified for tax exemption either on the employee’s or the employer’s side. These myths seem to stem from people’s personal experiences in their previous jobs, where indeed some employers do not provide meal vouchers to these groups of employees. Nevertheless, this does not mean that it is prohibited by law or that providing meal vouchers to these groups of employees brings a tax or other disadvantage.