Settlement of costs related to the use of the employee's private car
Cars occupy the first place among the means of transport most often used by entrepreneurs. In a situation where the company uses a company vehicle (which is a fixed asset in the company), there is no doubt as to the validity of including all related expenses as tax deductible costs. Importantly, this rule also applies if an employee uses such a car. And what is the settlement of costs related to the use of an employee's private car? Let's check.
Employees and cars in the company
It is obvious that not every company owner is able to provide his employees with company cars necessary for commuting to clients or business partners. The current regulations allow an employee to use a private car for business purposes. The reimbursement of expenses related to their operation may constitute a tax-deductible cost for the entrepreneur. However, to take advantage of this privilege, additional conditions must be met.
Employee's private car and tax costs
An employee who uses his private car at work may apply for reimbursement of expenses incurred for its operation (e.g. tolls for the highway, parking lot), while the owner of the company has the right to include the amount returned to the employee in the costs of obtaining income from the activity.
The principles of such a solution are set out in the provisions of the Act of July 26, 1991 on personal income tax and the Regulation of the Minister of Infrastructure of March 25, 2002 on the conditions for determining and reimbursing the costs of using passenger cars, motorcycles and non-motorbikes for business purposes. owned by the employer.
According to Art. 23 sec. 36 above. of the Act, a taxpayer may include as tax deductible expenses expenses incurred on behalf of employees for their use of cars for business purposes - up to a certain limit. The method of settling the costs depends on the nature of the trips made, i.e. whether the employee went on a business trip - long-distance driving - or used a private car for local trips.
Settlement of costs related to the use of the employee's private car on a business trip
At the beginning, it is worth emphasizing that a business trip takes place when an employee has to leave the place where the company's headquarters or place of work is located. Pursuant to the Regulation of the Minister of Labor and Social Policy on payments due to employees for a business trip, the employer, at the employee's request, may allow him to travel on a business trip in a passenger car, motorcycle or moped, which is not owned by the enterprise.
In such a case, the employee may apply for reimbursement of the costs incurred up to the amount resulting from the multiplication of the number of kilometers actually traveled by the rate for 1 km of mileage (the so-called mileage). These rates result from the provisions of the above-mentioned of the regulation and for a passenger car they cannot be higher than:
- for an engine with a cylinder capacity of up to 900 cm3 - PLN 0.5214,
- for an engine with a cylinder capacity above 900 cm3 - PLN 0.8358.
As mentioned, the employee, apart from the passenger car, may use other vehicles for which different rates per kilometer have been provided, i.e .:
- in the case of a motorcycle - PLN 0.2302,
- in the case of a moped - PLN 0.1382.
Therefore, the employee is obliged to keep records of the vehicle mileage, the elements of which are specified in Art. 23 sec. 7 of the PIT Act. It should contain at least:
- surname, first name and address of the person using the vehicle - the employee,
- vehicle registration number and engine capacity,
- consecutive entry number, date and purpose of departure, route description (from where-to-where),
- a number representing the actual mileage of the vehicle,
- the adopted rate for 1 km of mileage,
- the amount resulting from the multiplication of the number of kilometers actually traveled and the rate for 1 km of mileage
- signature and details of the taxpayer (employer).
Importantly, if an employee during a business trip also incurred other necessary expenses related to the trip, e.g. luggage fees, toll roads and motorways, parking in a paid parking zone, parking spaces - then they are also reimbursed in the amount resulting from the evidence of incurring these costs. costs.
Employee's private car for business purposes - local driving
The regulations also provide for the use of a private car by an employee for business purposes, not exceeding local driving. In this case, there are two possible solutions:
- settlement of operating expenses within the mileage limit,
- settlement of expenditure as part of a lump sum payment.
It is the entrepreneur who decides which of the above-mentioned solutions he chooses. It is important that the rules of settlements are specified in the civil contract between the employer and employee.
When accounting for the employee's local trips based on mileage allowance, the employee receives a reimbursement of expenses incurred for the operation of the vehicle in accordance with the rules adopted in the company, however, the employer's tax cost may only be the value resulting from the vehicle mileage records.
It is different if the entrepreneur chose settlements based on a lump sum. They consist in the employer setting a limit established as the product of the rate for 1 km - specified for mileage - and the monthly mileage limit for local driving.
In order for the refund for a given month to be possible, the employee must submit a written declaration that he or she uses a private car for business purposes. Such declaration should contain information about the vehicle - i.e. engine capacity, make, registration number and the number of days the employee was absent from the workplace in a given month (due to illness, vacation, business trip or other absence), as well as the number of days the employee did not have the vehicle for business purposes.
The amount of the aforementioned lump sum depends on the monthly mileage limit, which is set individually by the employer. However, its amount may not exceed the values resulting from par. 3 sec. 2 above Regulation of the Minister of Infrastructure.
The limit is determined depending on the number of inhabitants in a given commune or city in which the employee is employed, but may not exceed
- 300 km - up to 100,000 residents,
- 500 km - over 100,000 up to 500 thousand residents,
- 700 km - over 500,000 residents.
The amount of the lump sum is reduced by 1/22 for each working day of the employee's absence from the workplace and for each working day on which the employee did not have a vehicle for business purposes (paragraph 4 (2) of the above-mentioned regulation).
Reimbursement of expenses for using a private car for business purposes
Reimbursement of costs incurred by an employee for the use of a private car for business purposes in local driving is exempt from tax, if the obligation to bear these costs by the workplace or the possibility of granting the right to reimbursement of these costs results directly from the provisions of other laws. In such a case, the amount of these costs is determined on the basis of a lump sum or on the basis of the vehicle mileage record kept by the employee. This principle applies to employment in the forestry service, rescue service or in the social sector. Start a free 30-day trial period with no strings attached!
Therefore, if the provisions of other acts do not specify the obligation or the possibility of reimbursement of the costs incurred for local employee driving, then it is necessary to collect the PIT advance on the refunded amount. However, expenses incurred by employees during business trips pursuant to Art. 21 sec. 1 point 16 of the PIT Act, of course, up to the limit resulting from the vehicle mileage records.
Reimbursement for costs incurred on a business trip and during local trips, within the specified limits, shall not be included in the calculation basis for social and health insurance contributions.
To sum up, people running a business and employing employees can establish internal rules for accounting for costs related to the use of a private car for business purposes by an employee. With the adopted solution, taxpayers can save a lot - they do not have to buy company cars.