Meal Allowance and Other Benefits: Legal Obligations and Tax Treatment

Is the meal allowance a mandatory benefit for employees?

Although nothing significant has changed recently, questions are numerous:
Do all employees in the Republic of Serbia have the right to a meal allowance, or is this a relic of the past?
Are employers required to pay it? Must it be paid in cash? Is it taxable?
What is the minimum amount of the meal allowance? What is its tax status?

The Labour Law states that an employee has the right to food during work hours (commonly called a “meal allowance”), but everything else is left to the employer, i.e., to the employer’s internal rulebook and employment contract.

Namely, the Labour Law obliges employers either to pay a meal allowance in cash or to ensure that employees receive meals during the workday in another way. Therefore, the employer may decide how to provide meals for employees.

Payment in cash

If the employer decides to pay a meal allowance, such payment is considered wages, which means that it is subject to taxes and social contributions in the same way as salary.

Furthermore, logically — although the employer may regulate this at their discretion — the meal allowance is paid for days on which the employee actually worked, not when they were on leave, sick leave, or on business trips.

Neither a maximum nor minimum amount for this allowance is prescribed by law. The legislator has not set any guidelines that would help the employer determine the amount. It is only important that the amount is defined in the internal rulebook or employment contract. Also, the employer must treat all employees equally in this regard — different employees cannot receive different amounts of meal allowance.

Given that the meal allowance is taxed in the same way as salary, many employers choose to set it symbolically — for example, 100 dinars per month.

Important note:
Unlike transportation costs, per diems, or certain other reimbursements, the meal allowance and vacation allowance (“regres”) do not have a non-taxable portion. They are fully treated as wages and are taxed accordingly, regardless of the amount.

Employer-provided meals

On the other hand, an employer can provide meals on its premises — by preparing food there or ordering catering. When the employer acts this way, they do not additionally pay a cash meal allowance.

Here too, it is important that all employees or entire groups of employees (in one business unit, one shift, etc.) receive meals in this manner.

Do all employers pay a meal allowance?

Leaving the regulation of meal allowances entirely to employers has resulted in some employers not paying it as a separate benefit but rather merging it fully with salary.

First, two things must be understood:

1. The Labour Law implies that employees have the right to meal costs, but

2. In accordance with the employer’s internal rulebook and the employment contract.

Therefore, the right has not disappeared, even though it is often expressed symbolically and essentially invisibly. It still exists and should be clearly shown on the payslip. Although this monetary reimbursement for food during work hours is fully taxable as wages, it must still be listed separately.

How to be exempt from paying tax on the meal allowance

If we assume that the meal allowance is a mandatory benefit for employees and that it is taxed like salary, let’s look at whether there is any possibility of tax exemption for employee meals.

Employers may be exempt from taxes and contributions if they meet certain conditions defined in tax regulations. The key phrase here is organized meals.

1) Company cafeteria

If the employer provides meals in its own cafeteria, the cost of meals is recognized as a business expense in the employer’s tax balance sheet. It is important that this is actual food provided, not a cash payment.

2) Contract with a restaurant or catering provider

Organized meals also exist if the employer signs a contract with a restaurant or catering service that delivers food to the employer’s premises. Employees then have the right to a meal in that facility, and the employer pays the invoice directly to the provider. This expense is recognized as a business cost.

3) Meals for employees working in the field

Employees who work in the field for most of their work hours may receive organized meals or compensation that is non-taxable up to a certain amount. It is important to have evidence of fieldwork and appropriate time records.

Vacation allowance (regres)

Like the meal allowance, the vacation allowance is a right guaranteed by the Labour Law, but its amount and method of payment are fully determined by the employer and must be regulated by internal acts and/or employment contracts.

The law does not prescribe a minimum or maximum amount of vacation allowance, nor does it require payment at a specific time — the key is that the right is defined internally.

From a tax perspective, the vacation allowance is considered wages, meaning that taxes and contributions are calculated on the entire amount, just like salary. There is no non-taxable part or tax exemption, regardless of whether the employer pays a symbolic or higher amount.

In practice, the vacation allowance is most often paid once a year, at the time the employee takes their annual leave, but this is not a legal requirement — the employer may pay it monthly, quarterly, or annually, as long as this is clearly defined in internal acts and applied equally to all employees.

The vacation allowance is specific in that it is linked to the use of annual leave. An employee who, for whatever reason, does not use annual leave (e.g., due to maternity leave, childcare leave, etc.) has no right to the vacation allowance.

Non-taxable benefits

Besides meal allowance and vacation allowance, which are taxable and not subject to minimum legal amounts, employers also reimburse other costs to employees.

1) Commuting costs

The employer is obligated to reimburse commuting costs for all employees who do not work from home. An employer who provides transport does not have to pay this allowance.

Commuting costs are non-taxable up to the real cost (public transport ticket, fuel receipt), but no more than the amount periodically prescribed by the Government’s regulation on non-taxable amounts. At the time of writing, this amount is 5,630 dinars per month.

When the City of Belgrade made public transport free, employers lost the reference value for actual cost. Despite the Ministry’s opinion, employers resolved this in various ways.

2) Per diems for business trips

Domestic per diems are non-taxable up to 3,380 dinars (current amount), provided there is a decision on the business trip and accompanying documentation.

Foreign per diems are non-taxable up to 90 euros per day.
The employer may set higher per diems in internal acts, but any amount above the non-taxable threshold is subject to taxes and contributions.

3) Gifts for employees’ children

Gifts to employees’ children up to age 15, for New Year and Christmas holidays, are non-taxable up to 14,077 dinars (current amount).

4) Voluntary health insurance

Employers wishing to attract specialized staff often offer voluntary health insurance as a benefit. This benefit has favorable tax treatment, as employers may pay up to 8,449 dinars monthly without taxation.

Precise documentation

To record meal costs as business expenses or to pay non-taxable benefits lawfully, the employer must have:

• an internal rulebook precisely defining the benefits,
• contracts and records with restaurants/canteens/food suppliers,
• clear documentation concerning business trips, travel costs, etc.

Anything that is not properly documented in the strictly prescribed manner — to qualify as an expense or non-taxable benefit — is treated as wages.

Conclusion

Meal allowance and other benefits under Article 118 of the Labour Law are not optional for employers — they are statutory employee rights. However, the method of ensuring meals and the amount of benefits is entirely left to internal acts.

It is important for employers to distinguish between:
• what is a legal obligation under the Labour Law (providing meals during work), and
• what is tax-favorable (organized meals, real commuting costs, per diems, other benefits).

Meal allowance and vacation allowance are always treated as wages and fully taxable, while some other benefits may be paid without taxes and contributions — but only under strictly defined conditions and with proper documentation.

If there is any doubt regarding the tax treatment of a specific benefit, the best advice for an employer is to consult a professional or lawyer specializing in labour law and taxation.

Law Firm Petrović Mojsić & Partners