How to account for car rental in company costs?

Service-Tax

A car is usually very useful in running a business. However, depending on how often it is to be used, it may not be profitable to buy a car. In such a situation, it will be a good idea to rent a car. However, how to properly account for car rental in company costs?

Short-term car rental - costs

When renting a car, the entrepreneur is obliged to pay the lessor the appropriate rent. However, this is not the end of expenses - the taxpayer is also obliged to cover all other costs related to the operation of the car. These will include expenses for oil changes, fuel purchases or parking fees.

If the entrepreneur wants to include these expenses as tax deductible costs, he has the right to do so. However, a short-term lease (i.e. concluded for a period shorter than 6 months) and long-term lease should be distinguished here.

Therefore, in the case of a short-term rental agreement, from 2019, the taxpayer has the right to include the expenses related to a given vehicle in the company's costs, taking into account the limit of PLN 150,000. Moreover, as defined by the legislator, the value of the car, which we refer to PLN 150,000, is understood as the value assumed for insurance purposes. This situation also applies to renting a car for the duration of the repair in a workshop.

Example 1.

Adam rents a car for a week, the value of which in the AC policy is set at PLN 200,000. For the lease, the taxpayer received an invoice for PLN 1,000 net + PLN 230 VAT. In what amount, then, can he include in the company's costs the expenses related to the rental of the vehicle?

Mr. Adam will include 75% (PLN 150,000 / PLN 200,000) of this expenditure as tax deductible costs, so:

75% * [(1000 + (50% * 230)] = PLN 836.25

Long-term car rental

Until the end of 2018, the issue of booking the rent for a car rental was not fully settled. Numerous opinions issued by the tax authorities were not entirely consistent as to whether the rent for car rental could be included in the costs. However, according to the opinion of the Minister of Finance of 2013, taxpayers could settle the rent for a car directly in tax costs without additional limits on the basis of personal income tax.

In the case of long-term rental, from 2019, the rules for settling costs have also changed. Currently, regardless of whether the taxpayer deducts 50% VAT or 100% VAT (the car has been reported for VAT-26), the company's tax deductible costs include rental costs in the amount not exceeding PLN 150,000 (PLN 225,000 for electronic cars). ) in relation to the value of the passenger car being the subject of the lease.

Example 2.

Mr. Michał has signed a passenger car rental agreement worth PLN 300,000 for a period of 2 years. Every month, he receives an invoice for the rent for the rental of the vehicle in the amount of PLN 1000 net + PLN 230 VAT. In what amount, then, can he include in the company's costs the expenses related to the rental of the vehicle?

Mr. Michał will include 50% (PLN 150,000 / PLN 300,000) of this expense as tax deductible costs, so:

50% * [(1000 + (50% * 230)] = PLN 557.50

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As in the case of rent, in the case of an insurance policy purchased for a given car by the lessor, from 2019 the AC premium (voluntary insurance) on the value of the car exceeding the statutory limit of PLN 150,000 will not be a tax deductible cost.

To determine the amount of the AC premium constituting the company's cost, the value of the car specified in the rental agreement does not matter, and the value specified in the policy

Third-party liability insurance (compulsory insurance) for a given vehicle is 100% tax-deductible for the company.

Long-term car rental - maintenance fees

By the end of 2018, in the case of rented cars, the taxpayer had to drive mileage allowance and could include expenses up to the limit resulting from it (number of kilometers traveled for the company's needs * rate specified in the regulations).

From 2019, in the case of a rented car used both for business and private purposes, the taxpayer may include 75% of operating expenses as tax costs.

Operating expenses also include non-deducted VAT, i.e. the value of 75% is calculated on the net amount plus 50% of non-deductible VAT