New Rules for Business Trips Abroad
Starting from October 12, a new automated registration system will operate in the EU, by which all the facts of crossing the external borders by the citizens of third countries will be recorded. In brief, putting the usual stamps in the passports will be discontinued. That is way it is important to understand the way the above changes will influence business trips, the confirmation documents that will have to be provided.
What will change?
Previously, the copies of the pages of the passport for travelling abroad bearing the records on crossing the border when leaving the territory of Ukraine and returning to the territory of Ukraine could be presented as confirmation documents in case of a business trip of the employee abroad. The number of the days of staying abroad was calculated on the basis of these records. The amount of per diem allowance to be paid by the company to the employee depended on this.
Starting from October 12, 2025, in case of crossing the border with the EU countries, no usual stamps will be affixed to the passports. Electronic databases will be held instead. Information will be entered into the said databases at the moment of crossing the border with a biometric passport for the first time and will be further stored for three years. The following information will be entered in the databases:
· the facial image;
· fingerprints of four fingers;
· the passport for travelling abroad reference details;
· the date and the border crossing point (entry/exit);
· cases of entry denial.
As before, only individuals holding biometric passports for travelling abroad will have the right to stay in the Schengen area countries, for up to 90 days within each 180 days. This rule applies to business trips as well.
What types of business trip costs exist?
We would like to remind that the business trip costs include the actual transportation costs (including, luggage fees, booking transport tickets) both to the business trip destination and back and transportation costs incurred at the business trip destination (including transport rental costs), residence costs related to stay in the hotels (motels), as well as cost of meals and accessory services (laundry, cleaning, mending and ironing clothes, shoes and linen), costs of renting other residential premises, telephone costs, costs of issuing passports for travelling abroad, entrance permits (visas), mandatory insurance, other documented costs, the costs incurred with the view to compliance with the business trip destination entry and stay rules, including any fees and taxes payable in relation to incurring such costs.
The absence of the confirmation documents for each type of the specified types of costs, for which the funds were disbursed by the company, will lead to the taxation of the received amount as the employee’s income. To avoid this kind of situation, one should comply with the requirements of subclause 170.9.1 of article 170 of the Tax Code of Ukraine.
Main documents that have to be provided for confirmation
According to the provisions of the Tax Code, the actual business trip duration is defined on the basis of the order on business trip and subject to availability of at least one or several types of documentary evidence of making by the employee of the business trip. In other words, pursuant to the Code, one can choose the evidence out of the list of the options and in some cases even one document “that can serve most as evidence” will be sufficient. This can include:
- round-trip train, bus, flight tickets, luggage receipts (including electronic tickets, boarding passes etc.);
- invoices for the employee’s stay in a hotel or hostel with tax receipts, payment receipts;
- insurance policies: medical insurance, Green Card;
- documents (statements and/or data on the account) containing the information on the conducted payment transactions under the account;
- receipts confirming the payment for goods, services abroad;
- other documents confirming the costs amount and the stay (petrol station receipts, receipts for use of the paid roads, parking receipts etc.).
Business trip, not vacations
It is also preferable to have the documents confirming the relation of the business trip made by the employee to the business activity of the sending party. They include, in particular:
- the invitation from the party, company, to which the employee is sent;
- the documents proving the participation of the employee sent to business trip in the negotiations, conferences or symposia, other events dedicated to the subjects corresponding to the business activity of the sending party;
- other documents establishing or confirming the wish to extend the company’s business;
- a concluded agreement or a contract, the intention protocol as regards the further cooperation.
Additional confirmation documents
Business trip permits are not issued in Ukraine anymore for a long time, as their form was cancelled by an order of the Ministry of Finance already in 2011. But under the current circumstances, this document can be recalled, issued in a free form, with the option of confirmation of the employee’s arrival and departure (specifying the dates). Thus, one can request to sign such a letter and to certify it by affixing a seal. There are some grounds for such decision.
The list of documents confirming the stay abroad due to business trip provided for by clause 16.1 of section ІІІ of Instruction No.59 corresponds to the list specified in subclause 170.9.1 of the Tax Code of Ukraine, at the same time, the documents below are mentioned as well:
1. a statement issued by the company, to which the employee is sent as regards his/her stay at the business trip destination;
2. a service memo compiled in a free form on the execution by the employee during the business trip of a service assignment outside the permanent work place approved by the direct supervisor.
Thus, both the statement and the service memo can serve as a confirmation of the duration of the employee’s stay abroad during his or her business trip.
How to confirm the business trip in case the tickets are not available?
If the employee crosses the border with his or her own or service car, in addition, he or she will not have the tickets that would confirm the dates of crossing the border. Thus, this is even a more considerable problem. Some companies have faced it before, when their employees travelled to the countries, where no stamps were affixed to the passports. For example, Iceland, Liechtenstein, Norway and Switzerland.
The fact of crossing the border can be officially confirmed via receiving a statement issued by the State Border Guard Service of Ukraine. But this statement can be requested and received solely by the employee sent to business trip himself/herself or by his/her authorized person holding a notarized power of attorney. A request of a company will be declined, as this information is considered confidential and cannot be provided to third persons without the person’s consent. But the company’s chief accountant can be the authorized person. The explanations as regards the procedure of filing the application for such statement issuing are provided at the website of the State Border Guard Service of Ukraine. The term of the above statement issuing – up to 30 days.
Will the changes impact per diem allowances?
Not at all. On the top of the costs confirmed by the primary documents, the Tax Code of Ukraine provides for the costs, for which no confirmation documents are required – these are “per diem allowances”, costs of meals and personal needs during the business trip.
Currently, the maximum amount of per diem allowance when travelling abroad comprises EUR 80. This amount is accrued not only for the full days of staying abroad, but for the days of crossing the border (both during entry and exit). Regardless of the fact, that there will be no stamp in the passport, the availability of the confirmation documents listed above together with the order on the business trip will constitute a sufficient ground for payment and release from taxation of per diem allowance.
Attention! If the employee stayed at the business trip destination for an additional time due to justified reasons, to cover the costs incurred during the additional days of stay and per diem allowance, another order should be issued, in which the dates from which to which the business trip duration is extended should be indicated. If such order is not issued, the received compensation of costs incurred during the additional days of stay will be considered as the employee’s income subject to taxation.
Should the changes be introduced in the internal documents?
In most cases, the companies have approved Regulations on business trips, they are brought to the attention of all the employees against the signature in the course of the hiring procedure. The specified Regulations are usually developed on the basis of the Instruction on the Business Trips in Ukraine and Abroad, as approved by Order of the Ministry of Finance of 13.03.1998 No.59. The business trip procedure, the list of documents that the employee making the business trip should mandatorily provide upon returning, the term of submitting the respective report on the use of the funds disbursed to cover the business trip costs are defined in this Regulation.
If the list of the confirmation documents contains the requirement to provide the passport pages bearing the records on crossing the border, it should be withdrawn. At the same time, the requirement as regards providing the documents confirming the execution of the task, should be included in the Regulation. It can be a service memo compiled in a free form, in which the employee reports on the fulfilment of a service assignment during the business trip. A statement issued by the company or the organization, to which the employee was sent confirming his or her stay abroad can be added to the confirmation documents list as well.
Natalia Shcherbak, accounting and tax issues consultant