Besides employment contracts, contracts of mandate and business-to-business (B2B) remain the most popular forms of employment. The provision of a company car to employees employed under these contracts is accounted for differently than for employees employed under employment contracts.
Cooperation agreement (B2B)
The person with whom we entered into a B2B contract is self-employed, meaning they run their own business. They issue invoices for the work they perform for us, and the remuneration we pay them constitutes their business remuneration. The essence of a B2B contract is that the entity using the services under this contract does not incur employee costs, as is the case with employees employed under an employment contract.
The tax consequences of providing a company car to a colleague will depend, as with an employee, on the vehicle's use. If the vehicle is used exclusively for business purposes, the person using the car does not derive any benefits (income). Therefore, there are no tax consequences for them. The entity providing the car can account for 100% of the VAT and deduct 100% of the operating costs associated with using the car from their income. A VAT-26 report and mileage records are required. However, if the car is used for both business and personal purposes, the entity providing the car will be able to deduct 75% of the costs from their income and account for 50% of the VAT. The person using the car, on the other hand, will earn income from using the car for personal purposes.
In the case of B2B contracts, unlike employment contracts, the legislator did not introduce a lump sum income. This income therefore corresponds to the value of the benefit received. To determine this, one can use the rental price of a comparable car or the lease payment for the provided car. The operating costs of the car will also constitute income. Both the use of the car and the operating costs will constitute income for the person using the car, to the extent that they use it for private purposes. Therefore, it is important to record the use of the car for private purposes. If the entity providing the car was entitled to a 50% reduction in output tax by the input tax upon purchase (or upon leasing or renting), then providing the car to an employee for private purposes will not be a basis for calculating VAT.
However, it seems more advantageous to provide the car for private use for a fee. In this case, the car rental company issues an invoice to the user for the period of private use, including operating costs. The invoice amount will constitute the employee's expense.
Contract of mandate
For individuals employed under a mandate contract, the rules described for B2B contracts apply. However, while individuals collaborating under a B2B contract are required to declare their own income from unpaid private use of a car, under a mandate contract, the client prepares a document (PIT-11) for the contractor, indicating the amount of income earned from the unpaid non-cash benefit.
When a company car is used for a fee, a colleague receives an invoice. So, if a contractor uses a company car for a fee, should they receive a cash register receipt? Generally, yes. The Regulation of the Minister of Finance on exemptions from the obligation to keep sales records using cash registers exempts sales to employees from the obligation to record sales at the cash register (unless the sales involve goods and services enumerated in the regulation). This exemption applies to individuals employed under an employment contract, not a mandate contract. However, contractors can take advantage of a general exemption, which allows them to avoid recording sales to individuals at the cash register up to a sales value of PLN 20,000. This amount applies to sales to all individuals for whom a receipt would be required. Above this amount, the provision of a company car for private purposes must be documented with a cash register receipt.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of October 9, 2023
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