How do I book the cost of a car accident repair?

Service-Tax

During a business trip, you have to take into account every possible scenario, because a moment of inattention is enough to be injured in an accident or participate in a crash. The company car must be repaired later and compensation should be collected. However, how to book the costs of a car accident repair and how to settle PIT and VAT in this case?

The costs of car accident repair and the issue of PIT

In these circumstances, it is very important what type of insurance the car has - only third party liability insurance or third party liability insurance + AC insurance.

The compensation that the taxpayer receives is the company's income as of the date the money is actually received. However, how this income is accounted for by the entrepreneur depends on how his car is insured.

  • Third party liability insurance (compulsory insurance)

In this case, the compensation paid does not constitute the company's entire revenue. Why? The value of business income will be only the surplus between the compensation paid and the expenses incurred by the taxpayer for repairing the car. Repair expenses cannot then be deducted from tax deductible costs.

  • Liability insurance + AC (compulsory + additional insurance)

When a car that needs to be repaired after an accident has both comprehensive and third party liability insurance, the entirety of the compensation paid is revenue, while the repair expenses are tax deductible. If the taxpayer keeps a book of revenues and expenditures, he should enter the compensation in column 8 of the book (other revenues). On the other hand, taxpayers who are taxed with a lump sum are required to show the compensation in the income register and tax it at the rate of 8.5%. Taxpayers keeping the KPiR should include repair costs in column 13 (other expenses). On the other hand, the flat-rate fee does not record costs.

The costs of an accident car repair and the issue of VAT

As for the issue of VAT deduction, among others on operating expenses related to passenger cars, the taxpayer may choose one of the two available options:

  • full deduction of VAT on the purchase of the vehicle and operating expenses (including fuel), provided that the car is used only for business purposes and the formal conditions specified in the VAT Act have been met (vehicle registration in the Tax Office on the VAT-26 form, mileage for VAT purposes, drawing up the regulations for the use of the vehicle in the company);

  • 50% VAT deduction on the purchase of the vehicle and operating expenses - if the passenger car is used for mixed purposes (business and private) or if the taxpayer fails to complete the formalities referred to in the point above.

Consequently, these rules should also be applied in the case of settling the costs of repairing a car after an accident. Active VAT taxpayers may deduct from accident repairs either 50% or 100% of the input tax, which reduces the compensation paid by the VAT paid and deducted. However, in the case of a non-VAT payer, the payment of compensation is made in the gross value of the costs incurred for the repair.