Using an employee's private car is a common practice. Companies don't always have a sufficient number of company cars, or fleet policies limit their use by some employees. However, if a private vehicle is used for business purposes, the employee is entitled to reimbursement for these expenses.
If an employer pays an employee cash (reimburses expenses), is he obligated to collect an advance tax payment on it? Pursuant to Article 11, Section 1 of the Personal Income Tax Act, income includes money and monetary assets received or made available to the taxpayer during the calendar year, as well as the value of benefits in kind and other gratuitous benefits. However, pursuant to Article 21, Section 1, Item 16 of that Act, per diem allowances and other payments for the taxpayer's travel time are tax-free, up to the amount specified in separate regulations.
Therefore, reference should be made to the Regulation of the Minister of Infrastructure of 25 March 2002 on the conditions for determining and the method of reimbursement of costs for the use of passenger cars, motorcycles, and mopeds not owned by the employer for business purposes. Pursuant to § 2, the costs of using vehicles for business purposes are covered by the employer at rates per kilometer of vehicle mileage, which cannot exceed:
1) for a passenger car:
a) with an engine capacity of up to 900 cm3 – PLN 0.89,
b) with an engine capacity of over 900 cm3 – PLN 1.15,
2) for a motorcycle – PLN 0.69,
3) for a moped – PLN 0.42.
This means that if an employer reimburses an employee for the use of a private car at a rate equivalent to the amounts above, it will not constitute a taxable amount. If the reimbursement is made at a higher rate, an advance tax must be deducted from the excess reimbursement over the amount specified in the regulation.
But what if an employee traveled on business in a private electric car? Electric engines have no displacement. Should this be considered 0 cm3 and the lower rate from the regulation applied?
This issue is clarified by the tax ruling of February 17, 2022, 0113-KDIPT2-3.4011.1172.2021.1.NM. According to the ruling, the cited regulation does not apply to electric cars at all. Therefore, the tax exemption covers the entire amount of the reimbursement of the costs of using a private electric car and is not limited by the limit set out in the regulation.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of April 29, 2024
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