How to book a car insurance policy in KPiR?

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Many entrepreneurs cannot imagine running a business without using a car. It is possible to use a private vehicle and a company vehicle, i.e. entered into the register of fixed assets. Moreover, when introducing a passenger car to the company's property, it is necessary to specify the way of using it, i.e. whether it will be used exclusively in business or in a mixed manner (company and private). This choice affects the deduction of VAT on invoices relating to the operation of this vehicle (50% or 100%). The tax costs include many expenses related to the use of the vehicle, one of which is insurance. Do you know how to book a car insurance policy? Check!

Insurance policy in company costs

One of the basic and necessary expenses incurred by the entrepreneur in connection with the use of the vehicle is the payment of the insurance policy.

Pursuant to Art. 22 of the PIT Act, tax deductible costs are costs incurred in order to achieve income or to maintain or secure a source of income, with the exception of the costs listed in art. 23. In connection with the above, the expenditure related to the purchase of an insurance policy for a vehicle used in the course of business activity may be included in company costs.

How to book a car liability insurance policy in KPiR?

The basis for recognizing the expense in company costs is the insurance policy concluded with the insurer.

Pursuant to the ordinance of the Minister of Finance on keeping a tax book of revenues and expenses, the basic document for recognizing an expenditure is a VAT invoice. When concluding a contract with the insurer, the entrepreneur cannot obtain such a document, therefore it is permissible to post the expense on the basis of the policy.

The aforementioned regulation also allows for the recognition of expenses as company costs on the basis of other accounting documents. It should be remembered that such a document should have:

  • information about the parties involved in the business operation,
  • the date of issue of the document and the date of the operation, unless these dates are the same - in this case, it is possible to enter one of the dates,
  • information on the subject of the business operation,
  • the signature of the parties who concluded the contract with a number that allows you to link the issued document with the accounting document.

Liability insurance in company costs

The method of recognizing the policy in the KPiR depends on the adopted method of cost settlement - cash or accrual. We assume here that the entrepreneur has purchased a compulsory civil liability insurance policy for a company car.

If the cash method is selected, the expense is posted to the cost on the day the policy was concluded in full. In this case, the period for which the policy was concluded is irrelevant. In the case of the accrual method, the expenditure should be divided into the months to which it relates.

Example 1.

The entrepreneur settles on the basis of the cash-based method of accounting for costs. On October 10, 2021, a third party liability policy was signed with the insurer. The insurance policy was signed for a year. Hence the entrepreneur's question: How to book a car insurance policy?

The policy should be fully charged as of October 10, 2021. It is irrelevant that the policy covers the years 2021 and 2022 partially.

If the accrual method was chosen for the settlement of costs, the entrepreneur should know that it is more demanding than the cash method. In the case of settlement using the accrual method, expenses are recorded in the records on the date of incurring the expense, however, the period for which the policy was concluded is of key importance. If the policy covers the turn of the year, it is necessary to divide the expense in proportion to the length of the period it covers.

Example 2.

The entrepreneur settles on the basis of the accrual method of settling costs. On February 1, 2021, a third party liability policy was signed with the insurer for the amount of PLN 1,200. The insurance policy was signed for a year. How do I book a car insurance policy?

The entrepreneur should assign the length of the policy validity periods in a given year.

11 months in 2021 and 1 month in 2022.

PLN 1 200/12 months = PLN 100

PLN 100 * 11 months = PLN 1,100 - this is how much may be counted towards the costs in 2021

PLN 100 * 1 month = PLN 100 - this sum will be included in the costs in 2022

The expenditure related to the purchase of the policy is entered in column 13 of the KPiR.

How to book an additional company car policy?

Compulsory insurance (civil liability) in the case of company vehicles could be fully counted as tax costs. In the case of voluntary insurance, such as accident insurance, there is a limit of PLN 150,000. This limit applies only to passenger cars. The amount of voluntary insurance that may be included in company costs depends on the value of the vehicle that has been accepted for insurance. If the value of the vehicle is lower than PLN 150,000, such policy may be included in the costs in full. If the value of the vehicle is higher than PLN 150,000, it is necessary to calculate the proportion of the expenditure that may be included in the company's costs. The proportion is calculated according to the scheme:

(PLN 150,000 / vehicle value) * policy value = amount that can be included in the costs.

Example 4.

On January 10, 2021, an AC insurance contract for a company passenger vehicle was signed, the value of which on the day of signing the contract is PLN 190,000. The cost of the policy was PLN 2,000. The taxpayer asks how to book a car insurance policy?

Due to the fact that the value of the vehicle exceeds the limit of PLN 150,000, it is necessary to calculate the proportion of the amount that may be included in the costs.

(150,000 / 190,000) * 2,000 = PLN 1,578.95.

Therefore, only the company costs1 578,95 zlotys.

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How to book a private car policy?

Civil liability insurance of a private passenger car used in business and not entered into the register of fixed assets may be classified as tax deductible costs, but is subject to limitation.

Pursuant to Art. 23 sec. 1 point 46 of the PIT Act, expenses related to the day-to-day use of a vehicle used in business activity, which is also owned by the taxpayer, constitute tax deductible costs only in the amount of 20% of their value. This limitation also applies to insurance premiums for this type of car, regardless of whether it is an AC or third party liability insurance. Therefore, the taxpayer may book 20% of the cost of private car liability and motor insurance in the 13th column of the KPiR - other expenses.

Voluntary policies purchased for a passenger private vehicle are also subject to the 20% limit.

If its value exceeds PLN 150,000, in addition to limiting the limit of private vehicle costs by 20%, it will be subject to the limit of PLN 150,000. First of all, it is necessary to calculate the proportion to determine the amount of the expenditure that can be included in the company's costs. The limit is calculated according to the scheme:

(PLN 150,000 / vehicle value) * policy value * 20% = amount that can be included in the costs.

Example 5.

On January 10, 2021, an AC insurance contract for a private passenger vehicle used in the business was signed. The value of the vehicle is PLN 180,000, the cost of the policy is PLN 1,800. The taxpayer asks how to book a car insurance policy?

Due to the fact that the value of the vehicle is higher than PLN 150,000, it is necessary to calculate the proportion that may be included in the costs.

(150,000 / 180,000) * 1,800 * 20% = PLN 300.

Therefore, the company costs only PLN 300.