Car loan interest as a tax expense

Service-Tax

A car in the company is useful - any entrepreneur who has to travel to customers, contractors or pick up goods many times will agree. However, not everyone can afford to buy a company car from their own pocket - the solution is therefore a loan. Can the interest on such a loan be a tax expense in the company?

As a rule, it is recognized that credit interest may be a tax deductible expense when the credit itself is intended for business purposes. Therefore, if a car is purchased as a loan taken and then entered into the register of fixed assets of the enterprise, this condition can be considered as fulfilled.

However, there are two important things to remember. First of all - it often happens that before the vehicle is purchased, the first installment with interest must be paid according to the schedule. Such costs, incurred before the vehicle is included in the fixed assets, should increase the initial value of the vehicle. They will be settled in the company's costs through depreciation write-offs.

On the other hand, the second rule applies to interest paid after the car is entered into the company's records. According to it, interest may be included in the costs only when it is paid. Therefore, when booking a fee in the income and expense ledger, the taxpayer should use the date from the payment receipt, and not from the repayment schedule.

What often worries taxpayers is the limit to which the value of the car may be included in the costs. This limit is the equivalent of EUR 20,000, converted into the Polish currency according to the average exchange rate of the National Bank of Poland on the day preceding the handover of the car for company use. This limit also affects the amount of insurance, which may be included in the costs - it must be proportionally calculated and booked only in the amount corresponding to the 20,000 euro. The provisions on the limit are contained in Art. 23 sec. 1 point 4 and point 47 of the PIT Act.

However, as far as interest on a company car loan is concerned, there are no regulations restricting the entrepreneur from adhering to the limit. This means that in company costs the interest may be exactly the amount actually paid.