Regulations on business trips in Russia, what is necessary from a formal and pratical point of view
Regulations for busienss trips in Russia are an internal documument of a company. The form of the document can be freely chosen and is not regulated. Each company can develop its own forms and standards which meet its needs for business trips in Russia.
The regulation concering business trips needs to take into account different factors: Type of trips (in Russia and abroad), the character of the business trip expenses and the sums spend on business trips (only trip expenses like hotel and tickets or also other purchases), the type of used transport and many other features.
This post describes the types of different business trip expenses (from additional lugguage fees to payments) and describes the procedure to organize the travel documents for the staff (how to prepay business trip expenses to them, the obligatory documents, issues when travelling and so on).
When is it not necessary to issue a business trip order in Russia
Business trip orders have not to be used in all situations. If the departure and the return falls within one day a business trip order is not recquired. Also for sure if the trip is related to private purposes.
The objective of the document and the experience with busieness trips in Russia
The preparation of a business trip policy allows to recognize business trip related expeneses as tax deducable without any reservations. In case of a tax checking and a disagreement with a tax inspector the chief accountant can refer to the policy.
At the same time the document is to explain the employees the business trip rules. How much money they are allowed to spend on a business trip, how business trips and their costs are approved. Without any rules theoretically employees can spend unlimited amounts of money, stay in 4 star hotels, fly business class, etc. Thus if no business trip policy is available there can always be lots of items for discussion.
The busienss trip regulation also protects the companies shareholders. Otherwise, as real life practice shows the CEO of a company decides for himself how much money he wants to spend on his own business trip. And if the CEO works closely and trusted together with the Chief Accountant then it becomes very difficult for the owners to conduct any meaningful level of audit to understand the real costs of business trips. And then the CEO can decide to travel himself only business class, stay in 5 star hotels, eating out in restaurants and maybe not always tied to business reasons. This business trip policy thus protects the owners from being abused and also allows the Chief Accountant or CFO to insist that the CEO also keeps within certain established spending rules.
If no business trip policy is available in principle everyone can spend the money of the company as they see individually fit.
Travel policy in Russia – practical aspects
Experience shows that in many small and medium sized companies a travel policy does not exist. Even in companies belonging to western shareholders. The reason is very simple. It is not possible just to take a corporate document and apply it in Russia because it does not match the tax code in so many areas, so there is substantial work needed to prepare a local Russian travel policy. A chief accountant often do not have the interest to do this extra work and the CEO and others do not want to limit themselfs how they spend corporate funds. Or the CEO and the Chief Accountant just do not see the need for such a policy. In larger companies this is a different matter but in SMEs often a travel policy does not exist.
In most cases also general western travel policies are more generous towards employees than the base case in the Russian legislation. Thus some companies do not fix these aspects into written policies to be more flexible.
There is no need to prepare business travel policies in Russia if there are no plans to send employees on official business trips.
The strucutre of the regulation of business trips in Russia for employees
- General Provisions: This section of the document defines the terms business trip and the main tasks of the employee when leaving on a business trip
- The procedure for sending employees on a business trip: In this section the conditions under which employees are send on a business trip are described and also refered to their duties when absent
- How to register a business trip: This section details the order of documents for a business trip as adopted by the organization. Previously three documents were needed (the order of the head of the organization to send an employee on a business trip, a service description and a certificate to confirm the travel) all which have been replaced by a business trip order. (Link)
- Term and travel mode: This section describes the methode of determining the actual travel duration for the trip (the day of the departure, the return) as well as specifics about the working hours and rest periods for employees as well as any orders to be prepared or filled in before the departure
- Temporary disability of the employee during a business trip: In this section the responsibilites of the employee if he becomes unable to perform his duties during the bussiens trip are to be documented and also how monetary aspects are handled
- Foreign travel outside the Russian Federation: This section specifies aspects of foreign travel, like how to receive funds and how to determine the time outside Russia.
- Trave Expenses: This sections describes the reimbursment of travel expenses. Here also the daily per diem rate are specified. Also rules about hotel costs and other expenses can be determined here.
- Business trip order: In the specific order all aspects about the business trip are detailed as well as the work done during the business trip is specified.
If recquired the business trip regulation may include more sections and annexes such as sample documents, addtional notes and instructions, formats and memos to use for the documentation of expenses such like e.g. a car trip etc.
The busieness travel based on an official order always includes additional expenses, most of the time transportation expenses. If an employee travels in Russia the business expenses will for sure include transportation expenses when travelling abroad also visa, passport and some other potential expenses.
Travel expenses can be for trains, planes, bus, taxi. Also private cars can be used for transportation for business trips.
Original documents confirming the trip are attached to the expense report form and the cost are included in the business trip expense report in Russia. To document the trip the print out of the electronic ticket should be added as well as the ticket stub and any receipts for additional baggage costs. The ticketstub if existing and the route on the print out of the eticket should confirm the trip.
An employee using a car has to prepare a special memo fixing the details of the trip and the duration of the trip. The memo format shall be provided by the accounting department. The special memo report form for car usage is needed to calculate the daily allowances and confirm the related taxability of the expenses. A note should also explain the related costs of the car trip.
How an employe stays overnight at the location of his business trip might be different. Easiest version is by staying in a hotel.
Staying in a hotel is the easiest form and it is sufficient to submit to the accounting department the bill as well as the confirmation of payment which is even more important.
If a company rents long term a house or appartment the proportional costs can only be applied for the days that the employee is staying for the busienss trip there.
Daily allowances – per diems in Russia
Daily allowance – per diems – it is the compensation for additonal expenses incurred by the employee because of not staying at the standard permanent residence (and does not include costs for travel and other expenses). No documentation for the usage of the daily allowances must be provided.
The amount of the daily allowance can differ by employee in a company.
An employee who is on a business trip gets paid for all the days he is on the business trip. These amounts include addtionally to the basic working days:
- Travel days;
- Forced stops;
- Hospital stays.
No income tax is deducted from the daily allowances if they are at the standard Russian level. The norms and the amounts of daily allowances or per diems in Russia can be fixed in different documents: Collective barganing agreements, regulations on business trips, etc. Personal taxable income though is a different question. No personal income taxes are levied on daily allowances of up to 700 roubles for a travel day in Russia and 2500 for a travel day outside Russia. Any allowance above this incures income tax.
When calculationg the travel for trips abroad the number of days outside Russia is important. This information is taken form the stamp in the passport.
One small nuance is that when travelling abroad the first or the last day will be calcualted as travel in Russia with the lower daily allowance.
When the duration of the travel is less than one day (does not go past midnight) then the company can e.g. pay a reduced per diem allowance of 50%.
The Draft travel policy for Russia, downloadable
Please take a look at the attached travel policy for Russia which you can download. The travel policy was prepared by experts in accounting and Russian taxation. It comprises of different parts, is modular and allows any company or the shareholders of a company to fix the travel policy in Russia.
Moreover. The documents is not only in Russian but will be in the future also billingual version available. This is a free travel policy for business trips in Russia.
To download the travel policy for business trips in Russia click here.
For more information about business trip rules in Russian and Tax and Accounting questions around busieness trips click here.