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Vehicle mileage records - worth knowing

Vehicle mileage records

Expenses allocated to the operation of a car for business purposes are tax deductible expenses for entrepreneurs. The purpose of the expenditure is of fundamental importance here, i.e. the use of the car to generate income or secure it in the future, as well as proper documentation of the costs incurred.

The condition for including the expenses related to the use of such a car as tax deductible costs is keeping records of the vehicle mileage. The so-called mileage allowance for a car that is not a fixed asset applies to passenger cars and other motor vehicles that do not have the appropriate manufacturer's approval, required for cars of this type. These records are not kept for trucks.

Vehicle mileage records and the mileage limit

Expenses for the operation of passenger cars, not entered into the register of fixed assets, are tax deductible costs only up to the limit called "mileage". It is about limiting the costs related to the operation of such a vehicle to the amount which results from the multiplication of the actual number of kilometers traveled by the standard rate for one kilometer of the vehicle mileage.

It is important to include in the vehicle mileage record only the kilometers traveled by the taxpayer in order to settle matters related to the conduct of business activity, since fuel expenses for private purposes cannot be included in the tax costs. The mileage limit according to the vehicle mileage record applies to all expenses that are incurred by the entrepreneur for the use of a passenger car, not included in the company's fixed assets. In addition to fuel, these will also include expenses related to its use, such as technical inspections of the vehicle, spare parts, car accessories, ongoing repairs, parking fees, and a car wash.

Operating expenses also include insurance costs. However, in the case of passenger cars, the principle applies here that the amount of the contribution that may be included in tax deductible costs is determined in proportion to EUR 20,000. Entrepreneurs who are natural persons convert the euro into PLN according to the selling rate of foreign currencies announced by the National Bank of Poland on the date of concluding the insurance contract, while legal persons take into account the average euro rate on the day of concluding the contract. With a car settled in the mileage register, this means that the entrepreneur takes into account two limits, first EUR 20,000, then "mileage".

With or without VAT?

It should be remembered that VAT taxpayers accept expenses in the net amount for their tax deductible costs. On the other hand, taxpayers who are not entitled to deduct input tax may include the entire value resulting from the invoice, i.e. the gross amount, as tax deductible costs. With the costs covered by the "mileage allowance" one can meet with a two-fold approach to this issue. On the one hand, there is a statement that the VAT charged on gasoline for a passenger car is tax deductible only within the "mileage" limit. On the other hand, Art. 23 u.p.d.o.f. or art. 16 u.p.d.o.p., which allow to include all non-deductible VAT as tax deductible costs. From this second view it follows that VAT is charged as a cost, regardless of whether the purchase of gasoline is within the limit calculated from the vehicle mileage record or not. According to this view, when calculating "mileage", the net amounts resulting from invoices should always be taken into account, while non-deductible VAT can be included in costs in full regardless of the limit.

The amount of the rates and the pattern of the records

The rates for one kilometer are determined in accordance with the ordinance of the Minister of Infrastructure of March 25, 2002 on the conditions for determining and refunding the costs of using passenger cars, motorbikes and mopeds not owned by the employer for business purposes. The current rates for 1 km of vehicle mileage are:

for a passenger car with a capacity of up to 900 m3 - PLN 0.5214,
for a passenger car with a capacity of over 900 m3 - PLN 0.8358.

Keeping a record of the vehicle's mileage is a condition for including the costs of its operation as tax deductible costs. The records should include the following data:

name, surname and address of the person who uses the car for business purposes,
vehicle data: registration number, engine capacity,
next entry number,
date and purpose of departure,
description of the route (place of departure and destination),
the number of kilometers actually traveled,
the rate for 1 km of mileage,
the amount resulting from the multiplication of the number of kilometers actually traveled and the applicable rate for 1 km of mileage,
taxpayer's signature.

Operating expenses must be documented with invoices. From 2013, there is no longer an obligation to provide the registration number on invoices, however, it is advisable if the entrepreneur has several vehicles in his company with different rights to deduct VAT. This will make it possible to unequivocally determine whether, in a given case, the deduction of VAT is actually due. It should always be remembered that cost documents regarding expenses for current operation and entries made in the records are the basis for the analysis of the purpose of the expenditure, adopted as the entrepreneur's tax deductible costs. This objective must be related to obtaining income.

In the event that several passenger cars not entered into the register of fixed assets are used for the purposes of business activity, the register of vehicle mileage should be kept separately for each of them.

Kilometer for VAT purposes

The draft act adopted by the government to amend the VAT Act and certain other acts, which will come into force on 1 April 2014, provides for the possibility of deducting 100% VAT on the purchase of a car and operating expenses in the case of a vehicle weighing up to 3.5 tons. A revolutionary change however, it applies only to those vehicles that are used exclusively in business activities. Hence, if the taxable person does not use the car for private purposes to deduct the full value of VAT, he will be required to do so

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keeping detailed records of the vehicle's mileage.

Pursuant to the regulations, the mileage note should be carried from the date of commencement of the use of the motor vehicle solely for the taxpayer's business activity until the date of its completion. The vehicle mileage record must contain:

motor vehicle registration number,
day of beginning and ending keeping records,
the status of the mileage counter of the motor vehicle on the day of starting the record keeping, at the end of each accounting period and on the day of ending keeping the records,
an entry of the person driving a motor vehicle for each use of that vehicle, including:

next entry number,
date and purpose of departure,
description of the route (from where - where to),
the number of kilometers traveled,
name and signature of the person driving the vehicle

- confirmed by the taxpayer as to the authenticity of the entry of the person driving the vehicle, if he is not a taxpayer,

the number of kilometers traveled at the end of each accounting period and on the date of completion of record keeping.

In the event that the motor vehicle is made available to a person who is not an employee of the taxpayer, the entry of the use of the vehicle referred to in point 4 above:

is made by the person who makes the vehicle available,
includes:

next entry number,
dates and purpose of making the vehicle available,
odometer reading on the day the vehicle is made available,
the number of kilometers traveled,
odometer reading on the date of vehicle return,
name and surname of the person to whom the vehicle was made available.

Therefore, the new provisions of the act impose additional formal obligations on the entrepreneur, but in return allow for the possibility of deducting the full amount of VAT on purchases made.