Driving your company car home is a taxable offense
Perhaps you've noticed that on May 1 mileage rates the method used to calculate the level of reimbursement for employees using private cars for business purposes went up to zl. 0.44 per kilometer for cars with an engine capacity of up to 900 cc, and zl. 0.70 per kilometer for cars with an engine capacity over 900 cc. So what, you say?
Well, for those of you driving company cars, have you ever considered that your private use of that vehicle is in fact a benefit in-kind related to your employment and that the tax authorities would like very much to tax it?
Typically for the legislation here, while there is a provision for the reimbursement of costs for the business use of privately owned vehicles, there are no specific provisions setting out how the value of the benefit of private use of a company vehicle is to be calculated for the purpose of taxing it.
Nonetheless, there are a number of common and accepted practices flying around, which, by analogy, rely on the kilometer rates attributed to the business use of private vehicles.
How could anybody possibly know or care whether your journey is business or private? Well, even driving to and from work is classified as private use. As a case in point, a certain firm, which will remain nameless, was audited; it had a fleet of 300 company cars and no tax was being withheld in respect of private usage. The first question raised was "where is the company parking lot?" The idea was that if the cars were parked overnight outside the homes of employees then certainly there was private usage.
Of course, there's always the all-time favorite practice for recording and taxing private mileage: the trusty log book.
Think of the fun you could have every time you jump in the car and have to fill in the date, time, "kilometerage" and purpose of your journey, only to repeat the procedure on your return trip. Why? So that someone in HR, admin or accounts can then pore over your blow-by-blow account of the past month to try and figure out how many miles belong to the firm, i.e. are tax free to you, and how many belong to you so that they can add the value (number of kilometers x the appropriate rate see above) to your gross income and make the appropriate level of tax withholding.
The other option is to go for lump-sum mileage, where you estimate your average annual private usage, divide by 12 and hey presto your monthly kilometer budget. This traditionally varies from 200-500 kilometers a month, giving you back zl. 141-zl. 353. However, whether you use those kilometers or not you will be taxed on their value.
In both cases you should have written permission from your employer for private usage (either a side letter or covered in the terms of the general office car policy), although with the second option you need a separate agreement, or an ammendment to your employment contract confirming that you have permission to use your company car for private purposes up to a specified number of kilometers per month.
Another way out is to simply pick up all petrol costs without reimbursement from the company for business use. This is the least tidy from the paper chain perspective. However, it is by far the easiest way and equally as valid as the more documented methods due to the lack of any regulation to the contrary. In this scenario, the company picks up the costs of insurance, maintenance, etc., while you "pay" for your additional private usage through funding all fuel costs, with an occasional wash and wax thrown in for good measure.
Mull this over next time you're stuck in traffic: Do you really have a valid business reason for going home ?
Anna Szymanska is a senior tax manager in the Warsaw office of Arthur Andersen.
