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The use of a private car in the company

As part of your business, you can use a private car in your company, even if it’s not your company’s assets. The entrepreneur, who uses a private car in the company, by the end of 2018 could settle expenses related to the operation of the vehicle on the basis of the records kept on the vehicle, so-called kilometrówki. However, the amendment to the PIT Act from January 1, 2019 limits the amount of expenses related to the use of a private car within the company. The entrepreneur was also released from the obligation to keep vehicle records.

Expenses related to the operation of a private car in the company such as:

• reviews

• car insurance

• purchase of car parts

• fuel

the taxpayer may include in tax deductible expenses 20% of the expenses of the invoice received.

However, in order for the costs related to the employee’s private vehicle (used for business purposes) to be reimbursed by the employer, the employee is still obliged to drive the kilometer for PIT purposes. As for the deduction of VAT, the rules have not changed. If the car:

• is used exclusively in the company

• kilometer is kept for VAT purposes

• the vehicle was reported to the office using VAT-26

• rules for using the vehicle in the company have been introduced

• it is possible to deduct 100% of the value added tax

In the case of using the vehicle for mixed purposes (private and business), or if the above-mentioned conditions are not met, 50% of the VAT value is deducted from expenses related to the given vehicle without additional formalities.

100% VAT deduction on expenses incurred for a passenger car

An entrepreneur who is an active VAT taxpayer has the right to a full deduction of VAT on the purchase of a passenger car and expenses related to its use, provided that the car will be used only for corporate purposes. This use must be properly confirmed, which results from the provisions of the VAT Act. In such a situation the taxpayer must:

• report the use of a passenger car at the tax office on the VAT-26 form

• drive the mileage for VAT purposes

• introduce car use regulations in the company

50% VAT deduction on expenses incurred for a passenger car

However, if the entrepreneur wants to avoid unnecessary formalities or predicts the likelihood of private use, he should opt for a 50% VAT deduction. Then this method of deduction does not have to be reported in the office in any way and, importantly, it does not have to keep any additional records. In such a situation the taxpayer can deduct 50%, while the costs include the net value from the invoice and 50% of the VAT not deducted.