As of 03 March 2021, employers must provide across-the-board testing of their employees for Covid-19, so-called self-testing.
Because of the growing number of queries in respect of the accounting treatment of these tests we have prepared a short commentary.
Tax deductibility of the cost of tests
The financial authorities commented on the tax deductibility of the costs of Covid-19 tests in the spring of last year. It confirmed relatively unambiguously that in situations where an employer is ordered to carry out tests in accordance with existing regulations, these expenses represent a tax-deductible expense in accordance with Section 24(2) (p) of Act No 586/1992, on Income Taxes, as amended (the "ITA"). From the employees’ point of view, this is something that is not subject to tax at all.
Accounting for tests
An invoice for mandatory employee testing is accounted for by the employer in accordance with point 3.4. of the Czech Accounting Standard for Businesses No 019 to the debit of the relevant account in account group 52 - Personnel expenses. This follows from Section 24 of Decree No 500/2002, when item "D. Personnel expenses” includes, inter alia, legal and other social costs. As mentioned above, this expenditure represents a tax expense according to the ITA. Subsequent reimbursement of antigen test costs will be accounted for in accordance with point 4.5.5. of the Czech Accounting Standard for Businesses No 019 as a subsidy to cover operating costs in favor of account group 64 - Other operating expenses. This follows from Section 25 of Decree 500/2002, where item “III.3. Other operating income” includes, inter alia, subsidies to cover costs.
Testing from a value-added tax perspective
In order to mitigate the effects of the pandemic and in connection with the protection of the population, the Minister of Finance has waived the VAT on the supply of diagnostic medical devices, i.e. on Covid-19 tests which comply with relevant EU requirements, until 31.12.2022. Therefore, when purchasing tests, any invoices received should exclude VAT.
Do not hesitate to contact us for more detailed information.
