As a rule, there are two main options of using a car for the company's needs:
- The company is the owner of the car or the car is leased.
- A personal car of employee, board member or company owner is used for business purposes.
Let us consider these situations in more detail.
1. When the company owns a car (ownership, leasing)
When a company owns the car, it can have two types of vehicle use:
- 100% commercial use, which means that all trips in that vehicle are for work purposes only.
- Mixed use, which means that trips that are not related to commercial needs are also made.
100% use of the car for commercial purposes
Conditions for 100% refund of VAT on vehicle related expenses:
- the car is kept at the employer’s parking after working hours
- vehicle tracked by GPS Travel Diary (the obligation of proof is met)
- in the register of the transport department, a note has been made that there is no personal travel on this transport
In this case, there are no special benefits and VAT is subject to a full refund.
When the type of use changes (e.g. a vehicle that was used only for business purposes has become used for personal purposes as well) an application must be made to change the mark in the traffic register. If there is no mark of no personal use in the registry, the company must pay taxes from the special benefit.
Mixed use of the passenger car
If the company car can still be used for private trips, there is a special benefit that is calculated on the basis of kilowatts. This means that the benefit does not depend on how many kilometers you drive in your company car, but is based on the vehicle's power. By law, the price of the special benefit for a new passenger car is 1.96 euros per kW per month, and for passenger cars older than 5 years - 1.47 euros per kW per month. We emphasize again that this applies only to passenger cars.
The "two year” rule
There is a " two year" rule which arises when a company buys a car. If the car is purchased for commercial use only, and this is observed within two years of purchase and can be confirmed, the company can take a 100% input VAT deduction. But if at least one private trip occurs within two years of purchase, the right to deduct input VAT is automatically reduced to 50%, both on the purchase of the car and on operating expenses.. This means that the input VAT recorded at the time of purchase of the car must be reduced either on the VAT return for the month in which it was declared or on the following year's January return (and will be charged with Intresse). Input VAT on operating expenses must also be reduced in the relevant declarations. This is all regardless of the proportion of commercial and personal use of this car during the whole two years.
2. Use of a private car for business trips
If it is necessary to use a passenger car for business purposes, it does not have to be purchased. An employee, board member, or company owner can use his or her own personal car if they agree. Compensation can be paid for the use of a private passenger car
Which private car can be used for company needs?
Compensation can be paid for the use of a private car. A passenger car is considered to be a category M1 vehicle. The car can be owned by the person receiving compensation and can be used, which is recorded in a power of attorney or in the vehicle registration certificate.
What documents are required?
Documents required for compensation for the use of a personal vehicle:
- A written decision, order or decree stating: the name of the person receiving compensation; the amount of compensation; the date of travel or the period of travel for which expenses are reimbursed. The decision can also be issued for a longer period than a month.
- Copy of the document confirming the right to use a passenger car.
- A travel diary showing: the name and surname of the person using the car; the license plate number of the car; the starting and ending odometer reading of the car for each work trip; the date and purpose of each business trip.
It is not necessary to provide invoices or cheques for this compensation.
The travel diary may be in paper or electronic form. Compensation paid without record keeping is equivalent to a salary, i.e. declared and taxed as a salary.
Amount of possible compensation
The amount of compensation without additional taxes is €0.30 per kilometer of business trip, but not more than €335 per calendar month for one individual receiving compensation.
The amount of compensation (in the tax exempt amount) shall be declared to the INF14 by 1 February of the year following the reporting year. The declaration shall state the individual recipients of compensation and each vehicle.
There are no rules on how the compensation is paid, so the individual receiving the compensation may be paid one amount for the whole year. If other car expenses such as fuel or car repairs are reimbursed, their cost is also included in the monthly allowance of EUR 335.
In addition to compensation for the use of personal vehicles, the car owner can be compensated for parking fees without having to keep a travel diary. This requires expendable documents and justification (application). This amount of compensation is not included in the monthly norm of 335 euros.