Private passenger car in the company - settlement

Service-Tax

Nowadays, passenger cars are used in virtually every industry in which entrepreneurs operate. Passenger cars used in the course of business do not have to be only company vehicles. Entrepreneurs can also use private vehicles that do not constitute the company's property. How to use a private passenger car in a company and how to settle the costs associated with it? Read the article and check what has changed in 2019!

How was the private car accounted for in the activity until the end of 2018?

The possibility of including operating expenses in tax costs relating to private vehicles used as part of the business is regulated by law. By the end of 2018, in accordance with the then wording of Art. 23 sec. 1 point 46 of the PIT Act, it was not possible to include in the tax deductible costs “incurred expenses classified as tax deductible costs, subject to point 36, for the use of a passenger car not entered into the fixed assets register, including one owned by a person running a business, for the purposes of the taxpayer's business activity - in the part exceeding the amount resulting from the multiplication of the number of kilometers of the actual mileage of the vehicle and the rate for 1 km, specified in separate regulations issued by the competent minister; in order to determine the actual mileage of the car, the taxpayer is obliged to keep records of the mileage of the vehicle. "

Accordingly, in order for the taxpayer to include a private passenger car, and more specifically operating expenses, in the tax costs, it was necessary for him to keep kilometers for PIT purposes. Keeping kilometers consisted of recording the number of kilometers traveled for company purposes in a given period, as well as multiplying it by the rates per kilometer, which by the end of 2018 amounted to:

  • PLN 0.5214 when the engine's displacement is up to 900 cm3;

  • PLN 0.8358 when the engine's displacement is over 900 cm3;

  • for motorcycles - PLN 0.2302;

  • for mopeds - PLN 0.1382.

Then, the values ​​of the costs incurred were compared with the value resulting from the multiplication of the number of kilometers traveled for a given period and the applicable rate per kilometer. According to the calculation, the lower value was included in the costs, in the case of the excess number of kilometers traveled or the costs incurred, the value of the surplus was transferred to the next settlement period.

How to settle a private passenger car after January 1, 2019?

Pursuant to the amendment to the PIT Act, from January 1, 2019, the amount of expenses related to a private passenger car used by an entrepreneur as part of his business has changed. According to the wording of the new Art. 23 sec. 1 point 46 of the PIT Act, operating expenses incurred due to the use of a vehicle (e.g. purchase of fuel, service), being the property of a taxpayer running a business, a passenger car that is not an asset referred to in art. 14 sec. 2, point 1, and the cost of insurance of such a car, do not constitute the entire tax cost. As a rule, expenses and insurance will constitute a tax deductible cost of 20%, provided that the car is also used for purposes related to the business activity conducted by the taxpayer.

In line with the above, the obligation to drive PIT kilometers for private vehicles used as part of business activities in 2019 is waived. Thus, taxpayers are entitled to include in company costs 20% of the value of operating expenses - assuming that the vehicle is used not only privately, but also in business. In the case of active VAT taxpayers who use a private passenger car for mixed purposes, the value of 50% of the non-deducted VAT is also subject to the indicated limit. Then, 20% is calculated from the sum of the net amount and 50% VAT, which is included in the KPIR.

With regard to the possibility of including vehicle insurance in company costs, it should be borne in mind that its value is also subject to the indicated limit of 20%. It does not matter whether it is OC, AC or accident insurance. All costs related to the use of the vehicle are subject to the indicated limit. It should be remembered that all operating expenses related to the vehicle, values ​​calculated on the basis of the above instructions, are included in the KPIR in column 13 - other expenses.

Example 1.

As part of his business, Mr. Jan uses a private passenger car. Mr. Jan is a VAT-exempt taxpayer. In March 2019, the expenses related to the operation of the vehicle amounted to: PLN 160 for fuel and PLN 320 for the replacement of the starter. What amount of costs will be included in March 2019 for expenses incurred in KPIR?

  • expenses incurred in March: PLN 160 + PLN 320 = PLN 480

  • 20% of the value of incurred costs, which are subject to recognition in the KPIR: PLN 480 x 20% = PLN 96

In March, KPIR, in column 13 - other expenses, will include PLN 96 for the expenses incurred related to the operation of a private car used by the company. If the taxpayer, who is an active VAT payer, declares use for a private vehicle only for the purposes of business activity (excluding the possibility of private use), submits a VAT-26 declaration, keeps a VAT mileage and draws up the terms of use of the vehicle, he will be able to include 100% in the KPIR operating costs incurred on the vehicle.

Private passenger car - how to deduct VAT on operating expenses?

As regards the possibility of deducting VAT from invoices documenting operating expenses incurred in connection with a private vehicle used as part of the business, the rules applicable in 2018 have not changed. The above means that, as before, the taxpayer will be able to deduct 50% of VAT or 100% of VAT if additional requirements are met. As a rule, in order to benefit from a full deduction of VAT on operating expenses, the taxpayer should:

  • report the vehicle to the tax office on the VAT-26 form (as a rule, within 7 days from the date of incurring the first expense);

  • keep a record of the vehicle's mileage, the so-called VAT mileage;

  • draw up regulations for the use of the vehicle in business.

Completion of the above formalities will result in the possibility of recognizing 100% VAT deduction and 100% recognition of costs in KPIR.

Example 2.

Mr. Tomek, who is an active VAT taxpayer, uses a private passenger car as part of his business, which is not a company's property. The vehicle was reported to the tax office on March 15, 2019, on the VAT-26 form, which is equivalent to the declaration of use of the vehicle only for business purposes. A mileage test was carried out and the regulations for the use of the vehicle in the company were drawn up. The following expenses were incurred in March:

  • purchase of fuel PLN 252.03 net, PLN 57.97 VAT;

  • fluid exchange 145 PLN net, 33.35 PLN VAT;

  • premium for third party liability insurance in the amount of PLN 900.

What values ​​can Mr. Tomasz include in the KPIR and the VAT register of purchase for March?

Due to the fact that Mr. Tomasz met the conditions enabling him to recognize 100% of the costs, he will include in KPIR for March: PLN 252.03 + PLN 145 + PLN 900 = PLN 1297.03. Meeting the above conditions allows him to deduct 100% VAT, so the following will be shown in the VAT register: PLN 57.97 + PLN 33.35 = PLN 91.32

Accordingly, in the KPIR for March in column 13 - other expenses, PLN 1,297.03 will be included, while in the VAT register for purchases in March, the value of PLN 91.32 will be deducted.

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Example 3.

Mrs. Iwona uses her private car as part of her business. For the indicated vehicle, Ms Iwona declared use both in business and privately, with the possibility of deducting 50% VAT without additional formalities. Ms Iwona is also an active VAT taxpayer. In March 2019, Ms Iwona purchased fuel for the vehicle in the amount of PLN 120 net and PLN 27.60 VAT. What value for the costs incurred can Mrs. Iwona include in the KPIR and what deduction of VAT can she make for the month of March?

Due to the declarations of using the vehicle privately and in business, the taxpayer may include in the KPIR 20% of the cost incurred + the remaining 50% of the non-deductible VAT: 20% [PLN 120 + (50% x PLN 27.60)] = 26, PLN 76

Due to the use of the vehicle for mixed purposes (use in business and private use), the VAT register for March will show 50% VAT: PLN 27.60 x 50% VAT = PLN 13.80.

In March, Ms Iwona will show in the KPIR the value of PLN 26.76 in column 13 - other expenses, and will make a deduction of VAT in the amount of PLN 13.80.

How to use a private passenger car as part of your business?

As part of the employment relationship, the employee may use a private car for the so-called local trips, while pursuing corporate goals. The costs related to the use of the vehicle are then settled in the form of:

  • mileage run,

  • monthly lump sum.

The vehicle mileage record is kept by the employee on the terms applicable until 2018, which means that he records all routes traveled by a private passenger car for company purposes and at the end of the month, based on the product of the number of kilometers traveled and the applicable rate per kilometer, he receives from employer reimbursement. The value returned to the employee is included by the employer in the KPIR in column 13 - other expenses.

In the case of a monthly lump sum, records of the kilometers traveled are not kept. The reimbursable costs are then calculated as the product of the rate for 1 km and the monthly mileage limit. The monthly limit of kilometers for local driving is set by the employer, but this limit may not exceed:

-300 km (in a commune / city up to 100,000 inhabitants),

-500 km (in a commune / city with over 100,000 to 500,000 inhabitants),

-700 km (in the commune / city with over 500,000 inhabitants).

Employees paying in the form of a monthly lump sum prepare a statement at the end of a given month that they use a private passenger car for company purposes, containing, inter alia, vehicle data (engine capacity, make, registration number). In addition to the mileage limit, vehicle data and calculated values, the statement also indicates the number of days for which the lump sum is calculated. As a rule, the lump sum is not payable for days when the employee is absent (e.g. vacation). Information about the absences should be included in the declaration.

Example 4.

Ms. Alicja uses a private passenger car for local driving for the employer, achieving the goals of the company, located in a city with over 500,000 people. residents. The costs of using the vehicle are settled on the basis of a monthly flat rate, the limit of which the employer has set at 700 km. Ms. Alicja's vehicle has an engine capacity of over 900 cm3. What amount for the reimbursement of the operating costs of the private vehicle should her employer pay her at the end of the month?

If the engine's displacement is over 900 cm3, the rate for 1 kilometer is PLN 0.8358

Calculation of the monthly lump sum: 700 km x 0.8358 PLN. / Km = 585.06 PLN.

At the end of the month, the employer will have to pay Ms Alicja the amount of PLN 585.06.

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Pursuant to Art. 12 sec. 1 of the PIT Act, the value to be returned will then constitute taxable income from the service relationship. The tax exemption applies only to certain employees who are entitled to this right under other acts, in accordance with Art. 21 sec. 1 point 23b of the PIT Act. Such an interpretation of the law is confirmed by the Judgment of the Provincial Administrative Court in Gdańsk of February 7, 2017, file ref. act I SA / Gd 1461/16: Since, therefore, the exemption referred to in Art. 21 sec. 1 point 23b of the Personal Income Tax Act, applies only to certain employees, i.e. those to whom the right to reimbursement was granted on the basis of the provisions of separate acts, it should be recognized that the legislator will prefer all other cases of reimbursement by the employer of the costs of using a private car for business purposes , generate income from an employment relationship subject to taxation on the same principles as other benefits obtained on this account.

The value returned to the employee, based on a monthly lump sum, will be the employer's tax deductible cost, which will be included in column 12 of KPIR - remuneration in cash and in kind.