Accident car repair and costs covered by insurance
Virtually every entrepreneur has a car in the company. It makes it easier not only to reach the customer, but also more and more often serves as a representative. When driving on roads, you have to take into account the possibility of participating in an accident. Accident car repair is associated with numerous expenses for the entrepreneur. How to account for this type of event on the basis of income tax and VAT? We explain below.
Accident repair of a company car - income tax
When it comes to settling a post-accident repair of a company car on the basis of income tax, the most important type of insurance is the type of insurance covered by the car - only third party liability insurance, or both third party liability and comprehensive motor insurance.
Accident repair of a company car covered only by third party liability insurance
If a company car that has suffered an accident was covered only by civil liability insurance, the expenses related to its repair do not constitute a tax deductible cost. The received compensation constitutes income, but only in the amount of the excess of obtained compensation over the expenses incurred. This type of income should be shown by the entrepreneur in the KPiR col. 8 - other income.
A company car covered only by third party liability insurance had an accident. In connection with this event, the entrepreneur received PLN 6,000 in compensation. The costs related to the repair amounted to PLN 5,000.
In such a situation, the entrepreneur will be obliged to prove PLN 1,000 of remaining income from business activity:
PLN 6,000 (compensation) - PLN 5,000 (repair) = PLN 1,000 (income)
Accident repair of a company car covered by AC insurance
In the case of a post-accident repair of a car covered by AC insurance, the issue of settling the costs of repair and compensation is slightly different than if the taxpayer would only have vehicle liability insurance.
Having autocasco insurance, the entrepreneur may include invoices documenting the car accident repairs as tax deductible costs. When it is a car that is a fixed asset of the company, the column appropriate to show the cost will be col. 13 KPiR - other expenses. On the other hand, when it is a private passenger car, used for business purposes, and the expenses related to its use are settled as mileage allowances, the expenses related to the repair of the damaged vehicle should be included in the vehicle mileage records.
If the entrepreneur has motor own damage insurance, the received amount of compensation in full constitutes revenue, which should be shown in col. 8 KPiR - other revenues.
An entrepreneur taxed with a lump sum on recorded revenues, tax revenues from compensation at the rate of 8.5%.
Accident car repair - VAT
In this case, the type of insurance covered by the vehicle does not affect the right to deduct VAT on invoices for the accident repair of the car. So even if the car was covered only by third party liability insurance, the taxpayer will have the right to deduct VAT from the expenses incurred for the repair of the car, provided that they are related to the taxable activity. This is the basic rule regarding the deduction of VAT resulting from Art. 86 sec. 1 of the VAT Act.
The amount of VAT deductible depends on the type of vehicle, its technical conditions and sometimes additional tests, notifications and records. And so, if the entrepreneur has the right to deduct only 50% VAT from the expenses related to the use of the vehicle, also 50% VAT can be deducted from the invoices related to the accident repair of the car. In such a case, the non-deducted VAT amount, i.e. the remaining 50%, will constitute a tax deductible cost.
However, when the entrepreneur is entitled to a full VAT deduction from the expenses related to the use of the vehicle, the entire amount is shown in the VAT purchase register (regardless of the type of insurance).