Vacation in a company car
Vacation time, many employees go on vacation in a company car. What are the risks of using a company vehicle by an employee for private purposes?
The use of a company car by an employee after working hours raises a lot of controversy, especially from the point of view of tax law. Therefore, a company with its own car fleet should pay special attention to how and to what extent employees can use the company's vehicles for private purposes.
The key decision that the fleet manager must make is whether employees can have company cars at all in their private time. When making cars available to employees for private purposes, the company must take into account the increase in the costs of servicing its own fleet (greater wear, more frequent repairs), and the fact that, according to the interpretation of the tax authorities, the use of a company vehicle by an employee for their own purposes is their income, and such should be taxed. The introduced restrictions may relate to the number of kilometers traveled, the area in which an employee can move, or the use of a company fuel card (e.g. company cars can only be refueled during working hours). Practice shows the dependence of restrictions on the position occupied by a given employee, the higher it is, the less restrictions are imposed.
A holiday trip abroad
Usually, the employee has the right to use the official means of transport in Poland. However, it happens more and more often that he wants to go on holiday abroad. There are different conditions depending on where you want to travel. Therefore, it should obtain a written consent to leave the country from the person in charge of the fleet and, in the case of a leased car, from the lessor.
After Poland joins the European Union, a Polish driver is no longer required to have a green card on its territory. In the event of a trip outside the EU, such a card is necessary. Similarly with the AC insurance, which as a standard covers the territory of most European countries, but with the exception of the countries of the former Soviet Union (excluding the Baltic states).
Liability for damages
The issue of the employee's liability for the damage caused should absolutely be regulated in the contract concluded with the employee or in the company's fleet regulations. Such provisions protect the company in the event that the insurance company refuses to pay full compensation.
There are several situations where the insurer may refuse to pay you compensation. The most common reasons are when drivers drive the vehicle while drunk or run away from the scene of the accident. However, it should be remembered that the amount of the employee's burden for the damage caused is limited to three times the average salary.
Tax your income
Tax regulations clearly define the situation when an employee uses a company car for private purposes. According to them, it is a gratuitous benefit for the benefit of the employee. The tax authorities have no doubts that this is his taxable income.
Pursuant to Art. 12 sec. 1 of the PDOF Act, income from employment is considered to be all kinds of cash payments and the monetary value of benefits in kind or their equivalents, regardless of the source of financing these payments and benefits. These are in particular: basic salaries, remuneration for overtime, various types of bonuses, awards, equivalents for unused leave and all other amounts, regardless of whether their amount has been determined in advance. Moreover, income from employment is considered to be cash benefits paid for the employee, as well as the value of other gratuitous benefits or partially remunerated benefits.
The PDOF Act (in Article 11 (2a)) clearly indicates how to determine the income from obtaining free benefits. In the discussed case, the amount of income is determined as follows:
- according to prices applied to other recipients - in the case when the company deals with car rental,
- on the basis of market prices used in the provision of services or the provision of items or rights of the same type and species, taking into account in particular their condition and degree of wear and the time and place of making available.
What about insurance?
Under Art. 18 sec. 1 and art. 20 paragraph 1 of the Act of 13 October 1998 on the social insurance system (Journal of Laws of 2009, No. 205, item 1585, as amended) and Art. 81 sec. 1 of the Act of 27 August 2004 on health care services financed from public funds (Journal of Laws of 2008, No. 164, item 1027, as amended), the employee's income from the employment relationship is the basis for calculating the social insurance contribution and health insurance. Thus, the value of the gratuitous benefit for using a company car for private purposes is the employee's income from the employment relationship and is subject to contributions.
Pursuant to Art. 8 sec. 2 of the Value Added Tax Act, the provision of services is subject to taxation. The provision of services free of charge, which is not a supply of goods for personal purposes of the taxpayer or its employees, is also considered such, if they are not related to running the business, in this case the taxpayer must be entitled to reduce the amount of tax due by the amount of input tax on the purchase of goods and services. related to these services, in whole or in part.
It follows from the above provision that the value of this free benefit will be subject to VAT. Since providing an employee with a company car for private purposes free of charge is not related to running a business, it is a benefit for the employee's personal needs.
To sum up
Providing an employee with a company car for private purposes is often perceived as a measurable benefit and increasing his prestige towards other employees. It certainly plays a motivating role, linking it with the company. However, it is necessary to analyze what the enterprise can gain and what are the additional burdens resulting from tax and insurance law.