A car in a company and the control of the tax office

Service-Tax

The most common expenses in the company include the costs related to the use of the car. Many entrepreneurs try to lower the value of their tax liabilities in this way. However, you should be careful, because the tax office will check your car, if you exercise the right to a full VAT deduction from operating expenses and you are running a mileage test for VAT purposes. Do you want to know what it might look like and how to settle a car in the company? Read our article.

VAT deduction and a car in the company

In 2015, the legislator introduced many changes regarding the deduction of VAT from expenses incurred in connection with the use of a car in the company.

From 1 July 2015, entrepreneurs who have company cars that do not give the right to a full VAT deduction must indicate how the vehicle is used to determine the right to deduct as a percentage:

  • a car used in a mixed system, i.e. for business and private purposes - gives the right to deduct 50% of the value of VAT,
  • car in the company used only for business purposes - gives the right to deduct 100% of the value of VAT.

The first solution is the least problematic, because taxpayers do not have any major registration obligations.

The situation is different in the case of the second solution, i.e. the deduction of 100% VAT. Taxpayers who intend to settle expenses for a company car in this way should complete the mandatory formalities with the tax office:

  • submit a VAT-26 declaration to the tax office (within 7 calendar days from the date on which the first expenditure related to the operation of the vehicle subject to reporting was incurred),
  • keep a record of the vehicle's mileage, the so-called mileage stamp for VAT purposes,
  • introduce the regulations (rules) of car use in the company.

Car in the company: 100% VAT deduction - inspection by the tax office

Entrepreneurs who decided that company vehicles are used only as part of their business and have completed the above-mentioned formalities should be aware that the tax office will control such cases. Therefore, it is worth taking a stance on the obligations arising from the full deduction of VAT.

A safe solution is to control the booked expenses related to the use of the reported vehicle. Particular attention should be paid to the number of kilometers traveled in relation to the fuel purchased in relation to a specific settlement period.

During the inspection, officials will first check accounting documents and vehicle mileage records to analyze this relationship. For this purpose, the obligation to enter the number of kilometers traveled at the beginning and at the end of each accounting period was introduced. What's more, tax officials have the right to carry out a visual inspection of the vehicle, and therefore they will thoroughly inspect the company cars, assess their operation and estimate possible repairs related to the replacement of parts.

Each breach in the settlement of costs will affect the decision of the office regarding the conducted control and possible questioning of the taxpayer's decision in the context of deducting the full value of VAT. As a result, the taxpayer may be required to adjust costs and value added tax for the period in which it has made a full deduction.

Tax offices are the authorities that ensure order and compliance with tax law. Whether they control fairly - we do not know, but we do know that they certainly do it in great detail. In order to confirm their position, they use purely mathematical and logistic, and even detective principles. Therefore, it is the taxpayer's responsibility to ensure the accuracy of the documentation kept and the expenses included in the costs of the car owned by the company. You should make every effort to ensure this issue, which will certainly pay off when the tax office inspects your car.