Expenses for business travel and the right to a daily wage in the country and abroad, in tax terms, are regulated by the provisions of the Income Tax Act and the Ordinance on Income Tax. Although the provisions are prescribed, the right to a per diem for a business trip is not originally a worker’s right, but only prescribes what can be paid tax-free and in what amount. Therefore, it is clear why, during business trips, there are many questions related to determining the number of foreign and domestic per diems. Also, when traveling through several countries, you should pay attention to which country the per diems are calculated.
BUSINESS TRIP IN-COUNTRY AND ABROAD
A business trip abroad is considered to be a trip of up to 30 days continuously, from the Republic of Croatia to a foreign country, and a trip from one country to another, i.e. from one place to another in the territory of a foreign country. The total duration of the business trip includes a part of the business trip in the country, so the right to the number of per diems is determined according to the total duration of the business trip.
The decision on the amount of per diem for business trips abroad, for users financed from the state budget, prescribes the amounts of per diems that can be paid tax-free to workers who officially travel abroad. Thus, non-taxable fees for per diems for business trips to the home country lasting more than 12 hours a day and per diems for fieldwork in the home country amount to HRK 200,00. Per diems for a business trip in the country that lasts more than 8 hours and less than 12 hours a day amount to 100,00 HRK.
Non-taxable fees for business trips abroad lasting more than 12 hours a day and per diems for fieldwork abroad are determined by regulations on expenditures for business trips for users of the state budget, and per diems for business trips abroad lasting more than 8 hours, and less than 12 hours a day, up to 50% of the amount is determined by the regulations on expenditures for business trips for users of the state budget.
Reimbursement of transport costs and accommodation costs is determined by the number of actual expenses.
CALCULATION OF DOMESTIC AND FOREIGN PER DIEMS
The right to a foreign daily subsistence per diem is determined first, and then to the domestic daily subsistence per diem, considering the total number of hours and/or days spent on business trips. For example, if a person spent a total of more than 8 or 12 hours on a trip, and less than 8 hours abroad – the corresponding domestic per diem is paid (considering the total number of hours spent on the trip at home and abroad).
Simplified, of the total number of hours spent on a business trip, the right to a foreign daily wage is determined first, and then to a domestic one.
The right to a foreign per diem is determined by the number of hours spent abroad, which means that it is necessary to spend 8 hours abroad to exercise the right to half the foreign per diem, or 12 hours to exercise the right to a full foreign per diem.
Therefore, when calculating per diems, the right to the total number of per diems should always be determined first based on the total duration of the business trip. Then the right to a foreign per diem should be determined according to the number of hours spent abroad, and the domestic per diem should be determined from the remaining hours. In this way, you also control the number of calculated per diems, because if you determine the per diems separately according to the number spent in the country and abroad, it is very easy to get the wrong number of foreign and domestic per diems.
Under the provision of Article 7, paragraph 7 of the Ordinance on Income Tax Act, the per diem may be paid for business trips or work in the field, at home, or abroad.
For the non-taxable payment of per diems, the provisions of Article 7, paragraphs 8, 11, 14, 15, 18, 19, 20, 28, 29, 30 prescribe various criteria such as:
Criteria for the duration of the trip – A business trip in the country is considered to be a trip of up to 30 days continuously, to perform certain business jobs in the order for a business trip, in connection with the employer’s activities.
Criteria for the duration of a business trip abroad – A business trip abroad is a business trip of up to 30 days continuously from the Republic of Croatia to a foreign country and vice versa, and a trip from one country to another and from one place to another in a foreign country.
Criteria for the distance – Per diems for business trips in the country and abroad are fees to cover the expenses of food, drinks, and transport in the place where the worker is sent on a business trip from the place of work or from the place of work residence of the worker who is sent on a business trip to another place (except to the place where he has a permanent or usual residence), and distances of at least 30 kilometers. If one meal (lunch or dinner) is provided on a business trip at the expense of the employer, the non-taxable amount of per diem paid in cash is reduced by 30% or 60% if two meals (lunch and dinner) are provided. Breakfast included in the price per night is considered the cost of the night and is not considered a guaranteed meal.
Criteria for payment of per diem and insurance of accommodation – Expenditure for accommodation on a business trip is calculated in the amount of the received bill for the night.
DETERMINING A FOREIGN PER DIEM
The foreign daily per diem determined for the foreign country to which one officially travels is calculated from the hour of crossing the border of the Republic of Croatia, and the daily per diem determined for the foreign country from which one arrives, until the hour of crossing the border of the Republic of Croatia.
If air transport is used for a business trip abroad, the foreign daily per diem is calculated two hours before the scheduled departure time of the aircraft from the last airport until the time of arrival of the aircraft at the first airport in the Republic of Croatia.
If a ship is used for a business trip abroad, the per diem is calculated from the hour of departure of the ship from the last port in the Republic of Croatia to the hour of the return of the ship to the first port in the Republic of Croatia.
BUSINESS TRIP THROUGH MULTIPLE COUNTRIES
If the official trip is to more than one country, the daily per diem determined for the foreign country where the business trip begins is calculated, and the return per diem determined for the foreign country where the business trip ended is calculated.
For each stop, i.e., travel through a foreign country that lasts longer than 12 hours, a daily per diem is calculated for that foreign country, and any stay in a foreign country shorter than 12 hours is calculated for the time spent in the next country where it was spent.
The decision on the amount of per diem for a business trip abroad for users financed from the state budget, which recognizes these costs as material costs, for individual countries can be found HERE.
For everything to be orderly and valid, it is necessary to take care of a proper and credible travel order as well as the attached documents proving the expenses (and other data stated on the travel order).
TRAVEL ORDER
Expenses for business trips (per diems, transportation costs, fees for the use of a private car for official purposes, accommodation costs, etc.) are calculated based on a proper and credible travel order and attached documents proving expenses and other information provided on the trip.
Regardless of the form in which it is issued, the travel order as an authentic document contains, in particular, the following information:
- Date of issue,
- Name and surname of the person who is sent on a business trip,
- The place where the person travels,
- Purpose of travel,
- Travel time,
- In which time the person starts their business trip,
- Data on the means of transport used (if traveling by car, it is necessary to state the make and registration number of the car, the initial and final state of the meter – kilometer/hour),
- Time to return from the trip,
- Signature of the authorized person,
- Cost calculation,
- Liquidation of accounts and
- Road report.
The travel order must be accompanied by documents proving the incurred expenses, in particular:
- Toll invoices,
- Copies of confirmations of travel tickets,
- Accommodation bills and others, regardless of how the expenses are settled
(Article 8, paragraph 2 of the Ordinance on Income Tax).
Business travel expenses, per diem calculations, travel orders, all of this can be very confusing, and with this article, we hope, it will become simpler. However, in case of doubts, contact Confida’s team of experts with confidence and leave all doubts to us.
The article is written following the current legal regulations of the Republic of Croatia, so please read when reading about potential subsequent changes in legislation after the article is published.
