As part of its approach to support tourism in Slovakia, the Slovak Parliament has adopted an amendment introducing a recreational allowance known in the media as the ‘holiday voucher’ into the Labour Code. The amendment came into force on 1 January 2019.
The primary purpose of this change is to support tourism in Slovakia by encouraging employees to look for interesting places to visit in Slovakia and making employers reimburse part of the cost. However, this support for domestic tourism will be burden for bigger Slovak employers. The law specifically states that employers must avoid any discrimination between employees who apply for vouchers and those who do not, which in other words means that employers are forbidden to make any adjustments to their bonus schemes as a result of this change. According to Slovak lawmakers, a similar system already exists in several other EU countries, such as France, Hungary or Italy, and has apparently led to higher numbers of domestic tourists.
The obligation to provide employees with so-called holiday vouchers only applies to companies with more than 49 employees. Other employers may voluntarily decide whether to provide an allowance to employees as a form of a tax-free benefit. Only employees who will have worked for their employer for more than two years on the day their holiday starts will be entitled to ask for the vouchers.
How will it work?
The recreation allowance can be provided in two ways. The first is in a form of a holiday voucher, i.e. in a form of electronic payment card that will be tied to a specific employee. Its validity will be limited to the end of the calendar year in which it was issued. The second is as a direct payment to an employee in his or her pay period, on the condition that the employee provides evidence of the expenses incurred by submitting receipts, which must also include sufficient information to identify the employee, within 30 days following the end of the holiday period.
The amount of the contribution is set at 55% of the employee’s eligible expenses, up to a maximum of EUR 275 per year. Eligible expenses are accommodation or other packages associated with accommodation for at least two overnight stays in Slovakia for the employee, his or her spouse and/or children. The recreation allowance can also be used for holiday camps for children of employees.
The tax and social security contribution perspective
For the employee, the amount of the allowance will not be considered as a taxable income nor will it attract a social security contribution.
From the point of view of the employer, the allowance will be considered as a tax-deductible expenditure. An allowance provided at a higher rate than is required by law could be covered by the company’s social fund.