As one of the fundamental rights, the Labour Law stipulates that employees are entitled to health and safety at work, as well as health protection, according to the law and general act i.e. employment agreement.
In relation thereto, the Law on Health Protection contains special provisions referring to social care for health at the level of employers and prescribes that an employer shall organise and ensure from his own funds health protection for employees, for the purpose of creating conditions for health-accountable conduct and protection of health at employee’s place of work including, among other, preventive check-ups of employees (preliminary, periodical, control and targeted examinations) depending on sex, age and working conditions, as well as occurrence of professional illnesses, injuries at work and chronical diseases, in accordance with law.
Considering that employers cover the costs of the said examinations and that they represent certain allowance to employees, their tax treatment comes into question and the payment of mandatory social insurance contributions i.e. whether these can be considered as employees’ salary.
The Law on Citizens’ Income Tax stipulates that salary, in terms of this law, means salary earned on basis of employment and it is defined by the law regulating employment relations and other receivables of an employee.
The Law on Contributions for Mandatory Social Insurance establishes that the base for contributions for employees and employers is salary/wage and salary/wage contribution under the law regulating employment relations, general act and employment agreement or decision of competent authority.
In relation thereto, back in 2011 the competent ministry stands on the opinion that if an employer, for the purpose of providing regular health protection (medical check-up) under equal conditions to all its employees for establishing their health state required for performance of tasks within their assigned job, and in accordance with the general act of the employer, covers the costs and effects payment directly to the account of health institution rendering services, this shall not imply allowance to employees by the employer and as such it is not subject to citizen’s income tax on salary and payment of contributions for mandatory social insurance (Opinion of the Ministry of Labour and Social Policy, no. 011-00-00012/2011-02 of January 13, 2011).
Therefore, it stems from the above stated that an employer is obliged to ensure to the employees appropriate health protection and periodical medical check-ups on his own account, which may be exempted from taxation and payment of contributions for mandatory social insurance, under the following conditions:
- That medical check-ups are ensured for all employees under equal terms;
- That they are exercised for establishing employees’ health state related to performance of jobs with the employer;
- That employer effects payment from his own funds;
- That employer effects payment directly to the account of health institution rendering the service of medical check-up.
The above stated was confirmed by the recently published opinion of the Ministry of Finance no. 011-00-135/2021-04 from March 31, 2021.
On the other hand, when an employer effects payment in the manner departing from the stated conditions and if such payment is not done directly to health institutions but to a company that does not perform health activity – e.g. insurance company with which an employer has concluded the agreement on employees’ voluntary health insurance, the Ministry of Finance deems that such payment from employer’s funds represents allowance to employees by employer and as such it is subject to payment of taxes and contributions for mandatory social insurance based on salary, along with application of non-taxable amount in accordance with the Law on Citizens’ Income Tax/Law on Contributions for Mandatory Social Insurance.
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By Jovana Milic, Senior Associate, PR Legal