Buying a car for a company is the choice of most entrepreneurs. In many cases, a company car is also a necessity. It is used to transport goods or travel to customers or contractors. Therefore, buying a car for a company seems to be an obvious choice, although not the only one - some people decide to use operating leasing or financial leasing. What exactly is buying a car for a company? Can such a vehicle be included in the fixed asset register? Who ultimately owns the vehicle?
A passenger car for a company - types of financing
Buying a car for a company is a popular form of acquiring assets that are used to run a business. What's more, this solution is determined by tax regulations, because buying a car for a company (for cash or on a car loan) involves a number of tax reliefs and obligations. What options can entrepreneurs use in addition to buying?
- Operating lease
A company car can be included in the tax deductible costs, but it is included in the lessor's assets. VAT is added to each installment, so the lessee is not obliged to pay all VAT at the beginning. The operating lease agreement also allows you to deduct the initial fee to tax deductible costs.
- financial leasing
In the case of a car used under a finance lease, it is included in the lessee's assets. This means that the entrepreneur must make depreciation write-offs. Only the interest part of the leasing installments may be included in the tax deductible costs. In addition, VAT must be paid in full in advance together with the first installment. After the end of the leasing contract, the entrepreneur becomes the owner of the car.
- Use of a private car
The use of a private car is also a common practice, especially if the business does not require constant movement. From 2019, it is not mandatory to keep a mileage record - before that, entrepreneurs had to keep a detailed record of the mileage of a passenger vehicle. This is both a great simplification and a hindrance, because at the moment only 20% of expenses related to the use of a private car can be deducted from tax deductible costs.
Can I buy a car for a sole proprietorship?
Buying a car for a sole proprietorship is possible. It is worth knowing that in the case of a sole proprietorship, you can use the same forms of financing as in the case of larger enterprises. Therefore, leasing, a car loan for a company or buying a car for cash are at stake. Unfortunately, it is not possible to register a car directly for a sole proprietorship.
How does the inclusion of the car in the fixed assets register look like in this case? If the value of the car entered on the invoice exceeds PLN 10,000 net - in the case of active VAT taxpayers, or PLN 10,000 gross - for taxpayers covered by tax reliefs. The cost of buying a car for the company itself can be included in the costs of doing business. However, this does not apply to e.g. the value of the car exceeding the amount of PLN 225,000 in the case of an electric passenger car or PLN 150,000 in the case of other passenger cars - then write-offs for the wear and tear of the passenger car cannot be made.
What's the best way to buy a company car?
Many people wonder how to buy a car for a company to make it profitable. Here, a lot depends on whether the company has the necessary amount in cash or whether it plans to use a car loan. Moreover, the method of taxation and whether the entrepreneur is a VAT payer is also important. The purpose of the car is also important.
In order for this purchase to be beneficial, also in terms of the subsequent deduction of full VAT and depreciation, an individual approach to the case is necessary. If you do not know how to register a car for a company and what solution will be the most profitable for you, please contact us. Our specialists from Open Profit will carefully look at the available options and guide you through all stages of buying a car for the company.
Car for the company: tax deductible costs
Buying a car for a company in many cases allows you to settle the related expenses together with the tax deductible costs. We can include among others: fuel costs, repairs or even installment interest if the car was purchased on a car loan. So how do you deduct a company car? Please note that this is only possible under certain conditions:
- all expenses included must be thoroughly documented,
- the entrepreneur must prove that these costs were incurred in order to achieve or secure a source of income.
What's more, there are two limits related to the funds incurred for the operation of a company car:
- 75% return related to the use of a passenger car for mixed purposes, i.e. private and business,
- 100% refund in the case of using a company car only for company purposes (create regulations for the use of the vehicle).
It is also worth knowing that the purchase of a passenger car for a company and tax deductible costs is an issue regulated by the tax law, which treats passenger cars and trucks differently, and sets out specific rules regarding due refunds and their amount depending on the purpose of the car, its value and financing.
Buying a car for a company: VAT
The purchase of a passenger car for a company and VAT is an issue that interests most VAT taxpayers. These issues are quite complicated, and incorrect deduction of VAT may expose the entrepreneur to fines from the Tax Office. So what does the purchase of a vehicle for a company look like and the total or partial deduction of VAT?
There are also two limits here:
- 50% VAT for mixed use
- 100% of VAT for using the car for business purposes only.
To obtain a 100% VAT deduction, it is necessary to complete formalities such as:
- the need to draw up regulations for the use of the vehicle,
- vehicle registration on the VAT-26 form at the Tax Office,
- keeping records of car mileage for VAT purposes.
Buying a car for a company from a private person: VAT
So, when running a business, can you decide to buy a car from a private person for a company? Yes, but a company car from a private person will not be deducted. The purchase of a used car from a private person is not subject to a VAT invoice, as in the case of the purchase of a car from another entrepreneur - a VAT person. VAT cannot be deducted without an invoice. What's more, such a car from a private person to a company is also associated with a purchase and sale contract, which means that it is necessary to pay tax on civil law transactions.
Buying a car for a company from a private person is possible, but not always profitable. The situation is the same when buying from a second-hand car dealership. In such places, a VAT invoice is issued for the margin, which is not subject to VAT settlement.
Buying a car for a company: purchase and sale agreement
The purchase of a car under a purchase and sale contract for a company is the basis that allows you to enter the car into the company's assets. Regardless of whether it is a transaction with another entrepreneur or the purchase of a car for a company from a private person, a purchase and sale agreement is necessary for accounting purposes. This document should contain the following information:
- the object of sale and purchase,
- item value,
- data of both parties to the transaction,
- detailed conditions determining the course of the change of owner.
If the opposite situation occurs - the company sells the car that is in its assets, it is also necessary to draw up a purchase and sale agreement. At the same time, it is worth discussing the topic of buying a car for a company and income tax. The sale of a company car is considered income, therefore it is necessary to pay income tax in accordance with the rules on which the company is taxed.
Buying a car from abroad for a company
Buying a car for a foreign company is a fairly common trend. A significant part of entrepreneurs decide to import a car due to more favorable prices or limited access to a given model in Poland. However, in such cases, you should also take care of all tax and registration formalities related to the purchase of a car from another country. Among them is the excise tax, i.e. the tax on the value and value of the imported car.
Settlement of such a purchase is possible, but depends on a number of factors, including:
- the country from which the car was imported,
- whether the car is new or used,
- whether the buyer is an active VAT payer.
As in the case of buying a car for a company in the country, you need a purchase and sale contract in the form of a certified translation and a VAT invoice.
An electric car for a company - is it worth it?
Electric cars are becoming more and more popular on the Polish market, which is why many entrepreneurs decide to buy an electric car for a company. It is worth knowing, however, that despite the higher depreciation limit by as much as PLN 75,000, the depreciation of an electric car itself is no different from the deductions for a combustion car.
Thanks to this significant difference in the amount of depreciation, significant tax savings are possible. What's more, despite the high initial price, electric cars are quite cheap to maintain, which is why in many cases the purchase of an electric car for a company is considered an investment.
- What are the types of financing the purchase of a car for a company?
Buying a car for a company can be financed in several ways. These are most often:
- operational leasing,
- financial leasing,
- cash purchase,
- special purpose loan or loan.
All these possibilities also apply to entrepreneurs running a sole proprietorship.
- What's the best way to buy a company car?
Buying a car for a company is associated not only with tax relief, but also with obligations. The most favorable form of financing the purchase of a car depends on many factors, including its purpose, the company's capabilities and whether the entrepreneur is an active VAT payer.
- Is it worth buying an electric car for a company?
Electric cars have a higher depreciation limit - up to 75,000. This means that in many cases it is better to buy an electric car for a company, despite the higher market price. It is also worth remembering that maintaining an electric car is cheaper than a combustion car.