Passenger car rental agreement at company costs
Virtually every entrepreneur uses a car in his business. Currently, they are the most popular means of transport, which is associated with great convenience, freedom and usually time saving. Vehicles in a company usually constitute its fixed assets or are used on the basis of a leasing contract, although some entrepreneurs decide to use them, which is based on a car rental contract. How then to calculate the costs related to the operation of this type of vehicle? We explain below.
Passenger car rental agreement and tax costs
In order for the taxpayer to qualify a given expense as tax costs, the expense should meet the requirements of Art. 22 sec. 1 of the Personal Income Tax Act. According to its content, the costs of obtaining revenues are the expenses incurred in order to achieve revenues or to preserve or secure their source, with the exception of the costs mentioned in art. 23.
Passenger car rental agreement - mileage
Taxpayers using passenger cars in the company that are not entered into the register of fixed assets are, as a rule, obliged to keep records of the vehicle mileage, i.e. the so-called kilometers, as stated in Art. 23 sec. 1 point 46 of the Act.
Art. 23 sec. 1 point 46
Expenses incurred classified as tax deductible costs are not considered to be tax deductible costs, subject to paragraph 36, for the use of a passenger car not entered into the register of fixed assets, including one owned by a person running a business, for the purposes of the taxpayer's business - in 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. Mileage maintenance does not apply to the rental agreement, which is a long-term rental agreement and meets the conditions for being considered a lease agreement.
Vehicle mileage records kept for income tax purposes should contain at least:
- surname, first name and address of the person using the vehicle,
- Vehicle registration number,
- engine capacity,
- next entry number,
- date and purpose of departure,
- description of the route (where from - where to),
- the number of kilometers actually traveled,
- the 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 of the taxpayer (employer) and his data.
The rates for 1 km of vehicle mileage in 2018 are:
- for a car with a capacity of up to 900 cm3 - PLN 0.5214;
- for a car with a capacity of 900 cm3 - PLN 0.8358;
- for a motorcycle - PLN 0.2302;
- for a moped - PLN 0.1382.
Passenger car rental agreement - operating expenses
Use under a car rental agreement involves various operating costs - such as fuel, car wash, washer fluid, etc. The taxpayer using the rented car is obliged to settle them within the mileage allowance. In this matter, it is very important that the tax cost will be the sum of expenses incurred in relation to the vehicle, up to the limit resulting from the vehicle mileage record (km x rate).
Passenger car rental agreement - rent
Taxpayers have many doubts as to the method of settling rent for renting a passenger car, because they do not know whether to settle it directly in tax deductible costs or in the mileage limit.
Many tax interpretations have been issued on this issue, both favorable and unfavorable for taxpayers. In November 2013, the most important one appeared - the general interpretation of the Minister of Finance, which is binding on everyone. According to its content, the rent for a passenger car rental agreement is not an operational cost, and therefore is not subject to the limit of vehicle mileage records. Taxpayers who keep the tax ledger of revenues and expenditures recognize the rent for the rental of a passenger car in column 13 - other expenses.
Passenger car rental - VAT
The provisions regarding the deduction of VAT on motor vehicles have changed significantly. According to the new regulations, in the case of passenger cars weighing up to 3.5 tons, an entrepreneur who is an active taxpayer has two options - full or partial deduction of VAT on operating expenses. These regulations also apply to vehicles used on the basis of a passenger car rental contract.
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Passenger car rental - full VAT deduction
The taxpayer may fully deduct VAT from the operating expenses incurred on the passenger car used under the rental agreement. However, to make it possible, it has to complete a few additional formalities. First, the vehicle must be reported to the tax office on the VAT-26 form. After submitting the application, you need to establish the regulations for the use of the vehicle in the company and keep a mileage mark for VAT purposes.
VAT-26 must be submitted to the Tax Office within 7 days from the date on which the first expenditure related to the vehicles subject to notification will be incurred.
If information about cars below 3.5 tons, from which the taxpayer wants to deduct 100% VAT, is not submitted to the Tax Office, the taxpayer loses the right to a full VAT deduction for 50% of the VAT value resulting from the invoice.
Late submission of VAT-26 gives the right to 100% VAT deduction only from the date the information is delivered to the office.
Passenger car rental - partial VAT deduction
In a situation where the taxpayer uses the rented passenger car for mixed purposes (business and private), only 50% of VAT can be deducted from operating expenses and fuel.