The costs of using a replacement car - how to settle them?

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In the event that the car used in the company has an accident, the entrepreneur may receive a replacement car for the duration of the repair. The use of a replacement vehicle will generate additional expenses, which may not always be fully tax-deductible. So how do you calculate the costs of using a replacement car? Will the settlement of the replacement car for the fixed asset and the leased vehicle look the same? Let's check it out!

Costs of using a replacement car

Expenses related to the use of a replacement car are a tax cost, provided that the use of the car is related to the business. If you receive a replacement car, the type of vehicle is important.

If the replacement car received is not a passenger car - expenses for its operation (e.g. purchase of fuel, spare parts, use of a car wash, etc.) may be included in the full tax costs by the taxpayer, without the need to keep records of the vehicle's mileage.

The case is different when the replacement car is a passenger car. It does not matter then whether the damaged vehicle was a fixed asset of the company or a private car used for the purposes of the business. The received replacement passenger car will be billed on the basis of kilometers / mileage. This means that for a passenger car used as a replacement, a list of the routes traveled in connection with the conducted activity should be kept. On its basis and on the basis of the rates per kilometer established by law, a cost limit will be calculated. At the end of the month, this limit is compared with the sum of expenses (documented with invoices) related to the use of the vehicle and on this basis the amount of the cost is determined, which is included in the column 13 of the KPiR - Other expenses. The costs of using a replacement car will be included in the book within the limitation resulting from the entrepreneur's vehicle mileage records - PIT kilometers. Example 1.

XYZ, in connection with the accident repair of the vehicle, which is the company's fixed asset, incurred costs related to the use of a replacement vehicle, such as: fuel for the car, a car wash and purchase of washer fluid. Can these expenses constitute the full tax deductible cost without the need to drive a PIT kilometer (as in the case of a collision vehicle)?

As a rule, the taxpayer has the right to include the costs of using a replacement car only up to the PIT kilometer limit. Therefore, it is obliged to keep a record of the vehicle's mileage for income tax purposes and, based on the routes traveled, calculate the mileage limit, up to which it will include expenses for fuel, a car wash or a replacement car fluid in tax deductible costs.

Costs of using a replacement car for a leased car

There is, however, a certain exception to the general rule. It concerns replacement passenger cars received in exchange for a leased car. When the leasing contract specifies that the leasing company undertakes to provide the lessee with a replacement car for the duration of the repair, the entrepreneur may include the costs of using the replacement car directly in the KPIR without the need to keep the PIT mileage (Article 23 (3b) of the PIT Act). The confirmation of the above is the individual interpretation of the Director of the Tax Chamber in Warsaw of October 7, 2016, ref. No. IPPB6 / 4510-456 / 16-2 / SO, in which we read:
(...) it should be stated that the operating expenses related to the use of replacement cars provided instead of the cars subject to Leasing Agreements (...) will not be subject to restrictions (...). The company is not obliged to keep records of the vehicle mileage for the above-mentioned replacement cars, which means that all operating expenses constitute a tax deductible cost for the Company.

Example 2.
Ms Magdalena runs a sole proprietorship and uses a passenger vehicle financed by operating lease. The car has recently had an accident and is now using a replacement vehicle provided by the lessor. Can the expenses incurred for the purchase of fuel for a replacement vehicle constitute the cost in full or only up to the PIT mileage limit?

If the replacement car is made available under the leasing contract by the lessor, the taxpayer has the right to include the entire expense in tax deductible costs, without the need to keep records of the vehicle mileage for PIT purposes.

Rental costs and other costs of using a replacement car

The costs of using a replacement car are included in costs in whole or in part (in accordance with the PIT mileage limit) depending on the type of vehicle for which the replacement car was made available. The type of vehicle, however, does not matter in the case of expenses related to the rent for a replacement vehicle. The expenses related to the payment for the short-term rental of the vehicle do not constitute the operating expenses of the vehicle. They are incurred in connection with the acquisition of the right to use the car and are always posted to the KPiR in full (regardless of whether the replacement vehicle relates to a vehicle that was a fixed asset or a vehicle financed by leasing). Here, the general rule for short-term vehicle rental will apply. In accordance with the general interpretation of the Minister of Finance No.DD2 / 033/55 / ​​MWJ / 13 / RD-111005 of November 8, 2013: (...) expenses for renting a passenger car used for business purposes should be qualified as tax deductible costs on the terms specified in art. 22 sec. 1 of the PIT Act (...), i.e. in full. Example 3.

Due to the accident repair of a passenger vehicle constituting a fixed asset in the company, the taxpayer incurs expenses related to the rental for a replacement car. Can he include the expenses for the rent as costs in accordance with the mileage limit for PIT purposes, as well as the costs of using a replacement car, e.g. purchase of fuel for this car?

No, the taxpayer has the option of classifying the expenses for renting a passenger vehicle as tax deductible costs in full, and not as in the case of purchasing fuel for a rented vehicle in accordance with the PIT mileage limit.