VAT deduction of fuel for company cars

A company car is said to be the best car you can have. Especially if it is possible to deduct 100% VAT from the incurred operating costs (including, of course, fuel costs). It is possible, however, it requires meeting certain requirements. Namely – the company car must be used only for business purposes and it must be shown that it is not used for private purposes. It is not easy but it is doable – we explain what to do, using examples.

VAT on fuel – business trips and a car at home

A business trip definitely belongs to the category of “business purposes”. What if – in order to save time – an employee takes the car from the company on the day before departure and parks it near his home?

A business trip begins when the company car is collected from the company and ends when the car is put back. Even if the employee came back from the trip in the evening and parked in front of the house, and the next day he just arrived in the company car to work. As soon as the vehicle is returned, the business trip is over.

VAT from fuel for company car – what you need to know to be able to deduct 100% VAT

The matter of parking in front of the house is quite simple, but just documenting the dates of the business trip is not enough to benefit from the 100% deduction. It must be shown that:

  • A company car is used for activities related to the company’s operations (subject to VAT);
  • A register of vehicles is kept, including: registration numbers, dates of business trips, records of meter readings (on the start and end of the delegation and at the end of accounting periods), the number of kilometers traveled by the car and entries of the person using the vehicle, including dates and purposes of trips, descriptions routes and number of kilometers traveled;
  • Additional supervision activities are carried out, thanks to which the risk of using a company car for private purposes is eliminated or minimized;

Moreover, the entrepreneur is obliged to submit the VAT-26 form, which discloses the company cars covered by the application.

Additional activities seem to be not entirely necessary, but their performance works to the benefit of the company – in case the tax authority denies the deduction of 100% VAT.

VAT on fuel and other costs – creating a guarantee system

Why should the entrepreneur perform other activities? To demonstrate that the company has done everything possible to protect the vehicles from private use. The ruling of the Provincial Administrative Court in Rzeszów (in the judgment of June 2, 2020, file no. I SA / Rz 266/20) repealed the interpretation (unfavorable for the company) of the tax authority, thanks to the fact that the company implemented measures to minimize the possibility of using company cars for the purposes other than related to business activities.

These activities are:

  • An internal ordinance clearly defining the rules of using the company fleet;
  • The need for the employee to sign a declaration confirming the obligation to use the car in accordance with the order – before collecting the car;
  • The need to sign a declaration of awareness of the imposition of a penalty (fine) in the event of violation of the rules of the order;
  • Implementation of control activities in the form of a record of the number of kilometers traveled and analysis of data from fleet fuel cards (it is necessary to provide the meter reading before each refueling).

Fuel VAT – cost optimization and clear rules for using the fleet are the key

As you can see – resource optimization (time and finances) by starting a business trip at the time of collection of the company car and the end of the delegation on the day the vehicle is returned, as well as the implementation of a system preventing the use of company cars for purposes other than those related to the performed activity, translated into a favorable court ruling on the rejection of the 100% VAT deduction.

Properly described regulations and methods of their enforcement (and control) may also protect your company against unfavorable interpretation of the tax authority. Take care of your company and deduct 100% VAT for the company fleet – you already know how to do it.