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OPINION

Social Insurance Compliance in Respect to Benefits in Kind

Social Insurance Compliance in Respect to Benefits in Kind

Considering the intense competition between businesses, employers started offering a wide range of Benefits in Kind ‘BIK’ (usage of corporate and private cars, shares purchase plans, usage of assets, meals, gifts, relocation expenses, traveling expenses, etc.) aiming to attract skilled and qualified staff, and ensure work satisfaction, boost morale and improve productivity and profitability.

However, due to the uncertainty of the legislative framework of the tax treatment of the BIK, common practice and judgmental approach are followed leading employers to non-compliance with the legal framework, exposing them to financial and other risks. To address this ambiguity in the legislative framework, in October 2017, the Tax Department issued a draft informative document for public consultation on BIK.

The ultimate purpose of the Tax Department is the issuance of a formal analytical circular clarifying the meaning of the various BIK as well as the method of their quantification and taxation in order to assist companies to understand the treatment that has to be followed with the aforementioned benefits. This circular is expected to be officially announced by the end of this year. Currently, the content of the draft circular as published by the Tax Department is descriptive, comprehensive and easily applicable by the general public. However, companies have to consider the possible Social Insurance implications.

It should be noted that for the clarification of the treatment of BIK, the Social Insurance Services are taking into consideration the information submitted to the responsible department since each case may be treated differently. Currently, due to the absence of a general reference interpretation about BIK, gratuities, ex-gratia payments (Administrative Court – Case No. 74/2015) as well as the upcoming amendments which arise accordingly to the draft circular of the Tax Department, several companies are requesting the assistance of a specialist in this field, in order to receive the proper information and guidance on the Social Insurance treatment of the above-mentioned benefits and/or other payments and minimise potential financial and other compliance risks.

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