Representation expense and social expense limits approved 

 

New rules have been adopted regarding the deduction of expenses from income for representation expenses, employees' housing and meal expenses, as well as expenses related to treatment-preventive meals, milk, and other products and materials given to employees working under harmful, strenuous, or underground working conditions (Effective since 23 November 2024).

 

These rules include the value-added tax (VAT) as part of the deductible expenses for taxation purposes, in addition to the specified income deductions.

 

Employee meal and food expenses

Expenses related to harmful conditions

 

Meal expenses paid for employees during their absence (such as vacation, illness, etc.) or while on a business trip are not deducted from income under this rule.

 

The following meal expenses, as well as expenses related to treatment-preventive meals, milk, and equivalent products and materials for employees working under harmful, strenuous, and underground conditions are included in the deductions from income for tax purposes:

 

• The daily expense norm for treatment-preventive meals, milk, and equivalent products and materials for employees working under harmful, strenuous, or underground conditions is 5 (five) manats per employee.
• For crew members on maritime transportation, the daily expense norm for meals is 25 (twenty-five) manats per employee for those working on ships in the Caspian Sea, and 25 (twenty-five) US dollars per employee for those working on ships outside the Caspian Sea.
• For general employee meal expenses, the daily norm for deductions from income is 5 (five) manats per employee, whether the meal cost is paid directly to the employee or provided by the employer or purchased from another taxpayer in the public catering sector.

 

The following conditions apply for the deduction of employee meal expenses within the established norms:

 

• The cost of meals is paid directly to the employee in a non-cash manner;
• The preparation of the meal is provided by the employer himself and the purchase of products used for the preparation of the meal is documented in the manner prescribed by the Tax Code;
• Meal services are purchased from another taxpayer engaged in public catering activities, with the cost supported by an electronic invoice.

 

Treatment-Preventive Meals, Milk, and Equivalent Products and Materials for Employees Working Under Harmful, Strenuous, and Underground Conditions are considered as deductible expenses. 

 

The daily expense norm for treatment-preventive meals, milk, and equivalent products for employees in harmful, strenuous, or underground work is added to the meal expense norm for employees.

 

When the daily meal expense norm for crew members in maritime transportation is applied, the general meal expense norm does not apply.

 

Employee Housing Expenses

 

Fifty percent of housing (renting residential apartments or individual houses) expenses incurred for employees during the tax year may be deducted from income, provided it does not exceed 1% of the annual income.

 

The following conditions apply for the deduction of employee housing expenses:

 

• Rent is paid under a contract signed between the landlord and the tenant (employee or employer), notarized.
• Rent is paid by the employer to the employee or landlord in a non-cash manner.

 

Representation Expenses

 

Fifty percent of representative expenses incurred by the taxpayer during the tax year may be deducted from income, provided it does not exceed 1% of the annual income.

 

For the deduction of representative expenses, they must be incurred non-cash, justified, and documented according to the procedures established by the Tax Code.

 

Representation expenses include the costs incurred for the formal reception and/or service of participants in events organized to establish and/or maintain mutual cooperation. The following costs are considered part of representation expenses:

 

• Services Provided to Guests:
• Expenses for consular services (visa issuance, visa extension).
• Expenses for meeting and sending off guests at ports and stations.
• Transportation costs for travel to and from the event or meeting location.
• Hotel service costs (room reservations, accommodation charges).
• Meal expenses (breakfast, lunch, dinner, banquets, juices, mineral water, soft drinks, tea, coffee).
• Expenses related to translation services for representation events.
• Expenses for purchasing souvenirs.

 

Expenses related to entertainment, recreation, and health prevention or treatment are not included in representative expenses.