Using a partner's private car and tax consequences

Service-Tax

Due to various circumstances, partners of civil partnerships use their private cars to handle the partnership's affairs. However, they should remember that such activities will imply certain tax consequences. Therefore, in the following article, we will discuss what the use of a private partner's car looks like.

Use of a partner's private car based on mileage allowance

If a partner of a civil law partnership uses a private car (being its owner) for the purposes of his business activity, and the car is not entered into the register of fixed assets, nor is it lent to the company, then there will be no free benefit and, consequently, the income of the other partner. This would be the case when the costs of using the partner's private car were reimbursed.

It should be emphasized that a civil law partnership does not have legal personality, as it is a contract concluded between partners in order to achieve a common, intended economic goal. While a partner uses a private car to perform activities related to the activities of a civil partnership, he acts for the purposes of his business. Due to this fact, the use of the partner's private car will not result in the creation of a gain, and therefore income, for the remaining partners.

Partners of a civil law partnership have the right to include in the company's costs the incurred and documented expenses for the use of private cars and their operation, e.g. fuel purchase, replacement of spare parts, tires, current repairs, repairs, insurance, but up to the amount corresponding to the amount resulting from multiplying the number of kilometers of the actual mileage of the vehicle for business purposes and the rate for one kilometer of mileage, specified in separate regulations issued by the competent minister and provided that a record of the vehicle's mileage is kept.

Pursuant to Art. 23 sec. 7 of the Personal Income Tax Act, the vehicle mileage register should contain at least:

  1. name and surname and address of the person using the vehicle,

  2. vehicle registration number and engine capacity,

  3. next entry number,

  4. date and purpose of departure, description of the route (where from - where to),

  5. the number of kilometers actually traveled,

  6. the rate for 1 km of mileage,

  7. the amount resulting from the multiplication of the number of kilometers actually traveled and the rate for 1 km of mileage,

  8. taxpayer's signature and data.

Considering the above, a necessary condition for a partner in a civil partnership to include expenses for private use of a car for business purposes as tax deductible costs is that that partner runs mileage allowances. At the end of each month, the partner should add up the amount of expenses included in it, and then enter them in the tax revenue and expense ledger in the amount not exceeding the amount resulting from the multiplication of the number of kilometers of the actual vehicle mileage and the rate for one kilometer (the amount of the cost limit resulting from the mileage run) ) pursuant to Art. 23 sec. 1 point 46 of the Personal Income Tax Act.

It should be emphasized that the partner is responsible for the correct documentation of the expenses incurred, therefore, in addition to the vehicle mileage records, he should also have the documents in question in the form of invoices, bills that confirm the amount of expenses incurred related to the operation of the vehicle used by a given partner for the purposes of running a civil partnership. . The above-mentioned documents should bear the registration number of the partner's private car.

Individual interpretation of the Director of the Tax Chamber in Katowice of November 17, 2014, ref. No. IBPBI / 1 / 415-930 / 14 / SK.

Using a partner's private car under a lending agreement

When a private car owned by one of the partners of a civil law partnership, not entered into the fixed assets register as the company's assets, is put into use for business purposes on the basis of a loan agreement, two different situations may arise:

  1. if the lending is made to a partner who is also the owner of the vehicle, then no income will accrue on his side,

  2. when the lending is made to the other partner who is not the owner of the vehicle, then he will be obliged to take into account the determined value of the income due to him free of charge under the loan agreement in the income from business activity. The value of a given income, a partner receiving a car in the form of a loan, will be obliged to determine on the basis of market prices, taking into account the same type of car, the degree of its wear and its current condition.

As in the previous case, a partner using a borrowed car is obliged to use vehicle mileage records (mileage) and document the expenses related to the operation of a given car in the form of invoices and bills.

Individual interpretation of the Director of the Tax Chamber in Katowice of November 17, 2014, ref. No. IBPBI / 1 / 415-930 / 14 / SK.

Using a partner's private car under a lending agreement and PCC

An amendment to the articles of association is subject to tax on civil law transactions if it results in an increase in the tax base. The tax rate is 0.5%. Amendments to the partnership agreement include, inter alia, free-of-charge handing over of property or property rights to the company by the partner, therefore the civil law partnership should settle PCC tax at the rate of 0.5% on account of the partner giving the car to the company for free use under the concluded lending agreement. In this case, the taxable amount for the PCC tax will be the value of the benefits due as the contract is performed in the form of the annual value of free use (4%). The partners are obliged to submit the PCC-3 declaration and payment of the calculated amount of tax within 14 days from the completion of civil law transactions.