Company car and compensation as a company's income

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A company car, like any other, is prone to accidents. If the collision is caused by another driver, the entrepreneur is entitled to compensation. How should the compensation received and the costs covered by it be accounted for? How to deduct VAT on a vehicle accident repair? We explain below.

Compensation as income and a company car

If the company car is covered only by third party liability insurance, then the income that should be included in the tax records is the amount of compensation received in excess of the expenses incurred. However, when the car was additionally covered by voluntary autocasco insurance (AC), the income is the entire amount of compensation.

A taxpayer who keeps a tax book of revenues and expenditures shows revenue from compensation in col. 8 KPiR - other revenues.

Example 1.

An entrepreneur taxed on general principles had a car accident. The car was a fixed asset of the company and was covered only by third party liability insurance. The compensation received by the taxpayer was PLN 5,000. It was paid to the victim's account on December 15, 2015. Expenses for the post-accident repair amounted to PLN 4,000. How do I book the compensation received?

The entrepreneur as income in col. 8 of the KPiR - other income should show PLN 1,000 (the difference between the value of the compensation received and the costs incurred). The posting date should be December 15, 2015.

Attention!

The costs of post-accident repair of a car covered only by third party liability insurance do not constitute a tax cost.

Example 2.

An entrepreneur subject to flat tax had a car accident. The car was a fixed asset of the company and was covered by both civil liability and motor insurance. The compensation received by the taxpayer was PLN 10,000. It was paid to the victim's account on January 10, 2016. Expenses for the post-accident repair amounted to PLN 9,500. How do I book the compensation received?

On January 10, 2016, the entrepreneur should prove the income from the received compensation. The amount of income is the entire compensation received, i.e. PLN 10,000, because his vehicle was covered by both voluntary and compulsory insurance.

The company is taxed with a lump sum and compensation

The entity taxed with a lump sum should tax the income from the received compensation at the rate of 8.5%.

Example 3.

An entrepreneur taxed with a lump sum on December 31, 2015 received compensation for a car accident, which was a fixed asset. The amount of compensation was PLN 8,000. How do I check them?

The lump-sum fee should show the income on December 31, 2015. This income should be taxed at the rate of 8.5% and should be included in the same column in the income record.

Important!

Income is generated even if the compensation has been settled without cash. It should be shown on the date it is obtained.

Company car and the costs of post-accident repair

The entrepreneur may consider the expenses related to the repair of a company car as a tax deductible cost, provided that the car was covered by voluntary AC insurance. Then there are no restrictions on the recognition of costs in the KPiR, as long as the car is a fixed asset of the company.

Important!

When the company car was completely scrapped or the repair costs exceeded the amount of the awarded compensation, the loss should be included in the company's costs.

VAT deduction for car accident repairs

If the entrepreneur is a VAT taxpayer, he is obliged to cover the VAT resulting from invoices documenting the cost of repair to the value at which he will be entitled to deduct it.

The entrepreneur has the right to deduct VAT from the invoices documenting the costs of repair - even from those that have not been classified as tax deductible costs.

Important!

On April 1, 2014, the amendment to the Value Added Tax Act, also in force in 2016, entered into force. According to its wording, the taxpayer may be entitled to deduct 100% or 50% of VAT depending on the vehicle parameters and meeting additional requirements. Importantly, when settling VAT on this type of invoice, the entrepreneur should take into account the general provisions in force in this area. More about the issue of VAT deduction in the article: Car in the company after April 1, 2014.

Courtesy car - settlement

If, in connection with the accident, the taxpayer has incurred costs related to, for example, renting a replacement car, then this expense can be included in the company's costs.

Importantly, the invoice for the rent for the rental of a car should then be settled directly in the costs. On the other hand, the remaining expenses related to this vehicle (e.g. fuel) should be accounted for as kilometers.