Company Car in Czech SRO Company or Trade LicenseThere are basically 4 ways to use a car in a company:
- Renting a car,
- Buying a car (with a loan),
- Leasing a car,
- Using a private car.
Renting / Buying / Car loan / Leasing a CarRenting a car is astronomically expensive, and should only be used sporadically, otherwise it will quickly cost more than a car lease or car loan. Fuel expenses can be put in the accounting.
Buying is cheaper than leasing, but can create a gap in your company budget. On the positive side, buying reduces the taxes of that year (in case of an sro: it reduces the profit), and since you own the car, you are free to sell the car again at any point in time (not possible with a lease). Further, if you own a car it will be written off for several years. Costs for repairs, tires, accessories and fuel can be put in the accounting.
Many (second hand) cars are bought with a carloan, which can have shockingly high interest rates of 18% p.a. or more (+ hidden charges for keeping the account, obligatory insurance etc etc).
Leasing has the benefit of 48 or 60 monthly fixed payments that are known from the beginning. Downside is that breaking the contract is either not possible or expensive, and that during the lease you do not own the car, so you are not writing off anything. Costs for of repairs, tires, accessories and fuel can be put in the accounting as well.
Very common is a down payment ('Akontace') of 20-60% + 48/60 lease payments ('Platby').
Operational Lease / Financial Lease vs Car LoanAn operational lease is all-inclusive: repairs, service, tires all included in the lease sum.
A financial lease only covers the price of the car. Repairs, service and tires you will need to pay yourself (but are valid business expenses)
Montlhy lease payments have a VAT component, which can be claimed by VAT-registered entities (This can be an sro, but also an individual with a trade license). The VAT on the downpayment will be refunded immediately by the taxoffice on the next VAT Return, and you will get the VAT on the lease payments back in a number of years which each filing of the VAT Return.
Confusingly, care dealerships advertise 'Financial Leases', which in fact are carloans. I guess 'carloan' just does not sound that sexy.
If you use a carloan you will own the car, although you still need to pay back the bank. This is different from a lease. Also there you have to pay back the bank, but you do not own the car.
When taking a car loan you will immediately own the car (and start writing it off), in the same way as if you had paid for the car with own finances. The entire sum of VAT of the purchase price will be refunded by the taxoffice at once.
Car VAT Deduction / RefundBefore 1.4.2009, the 'old rule' was that VAT can only be deducted if the car has in the 'technicak' an 'N' specification ('utility vehicle'). If the car has an 'M' (normal passenger car) specification the VAT was not deductable.
However, since 01.04.2009 the VAT on all cars (also 'M' specification) is deductable unless the VAT has been re-claimed by the previous owner (so watch this when purchasing a second-hand car).
For purchases up to a year before VAT registration the VAT can be reclaimed provided that is is a company asset. So, if you earlier bought a car with VAT into the business, this VAT can be reclaimed.
A lease car is not a company asset, since it is still owned by the lease company during the lease. Therefore, of any payments on a lease (including downpayments / deposits) before VAT registration, the VAT can not be reclaimed. Wait with signing a lease agreement until AFTER VAT registration.
Note that if you de-register for VAT (or cancel your trade license entirely) before the lease ends, the tax office may unpleasantly surprise you with demanding the refunded VAT back.
Claiming foreign VAT on a car
If the foreign seller has a valid VAT number and you have a valid VAT number, then because of reversed-charges the sales invoice should not have any VAT.
But: it is not uncommon that the foreign seller is not so keen to sell without foreign VAT, even if you have a valid VAT number, because of VAT-fraud. Ask the seller before making the deal.
The CZ taxoffice does not handle foreign VAT, and will not refund it - you should file a request at the foreign taxoffice.
As one can read in a follow-up article, I am not so fond of importing a car. It is a hassle, warranty is an issue, VAT can be an issue, transport and importing and technical checks all cost money and time. For an average family car the actual financial benefit is not worth the hassle (in my humble opinion).
Car Costs - deductable when registered for Company Road TaxAll car-related costs (lease costs, fuel, tires, repairs) are expenses, as long as can be proven that the costs were necessary for 'conducting business activities' and the car has been registered for company road tax (silnicní dan).
A loan can not be deducted as company expense, it is calculated in another way.
If a company car is also used for private trips only part of the car costs can be put into the bookkeeping.
In addition, an employee will have to add a certain percentage to his income declaration, because use of a car is considered 'non-financial benefit'.
Company Road TaxRoad Tax for a company car (not buses and trucks) is between 1.000 and 4.000 CZK (depending on engine size and pollution catagory) annually, to be paid in quarters or at once. Note that this is a completely different thing than the highway sticker. You have to pay both.
Alexio recommends paying road tax at once at the beginning of the year, because forgetting a payment could result in a disproportional fine from the tax office and possibly rejecting car costs from the accounting.
On 01.02 of each year a company car needs to be re-registered as company car.
A car bought during the year has to be registered as soon as possible after the purchase.
Milage ReportNo matter how the car is put in the company, make sure every kilometer is registered, whether it is business or private. Taxoffices want to see this milage report, not having it can have unpleasant consequences (such as not accepting any car costs of the entire year in the bookkeeping).
For every trip it is necessary to register:
date, time, starting address, tacho, purpose of trip (client), date, time, end address, tacho
For trips abroad is the additional requirement for every time a border is crossed: date, time, border point, tacho in order to claim daily allowances while being abroad (for an average EU country this is 50 - 60 euros / day).
Alexio will provide to each accounting customer free templates to accurately record business trips, mileage reports and daily allowance.
Using a Private Car - Paying yourself per kilometerA good alternative for leasing and buying is using your private car, especially if your car is a bit older.
The compensation may be higher than the actual costs.
The compensation is based on a fixed part (sazba zkladní náhradny platná) and the average fuel price (prumerné ceny PHM). Both are determined and published by the Czech tax office.
|Fuel||fixed / km||Euro 91||Euro 95||Euro 98||Diesel|
Suppose the car runs 10 km on fuel of 25 CZK/l. That is per km 2.5 CZK.
Compensation is 3.90 (fixed) + 2.50 = 6.70 CZK / km.
A trip to Kolin and back 6.70 / km * 120 km = 804 CZK.
if you pay yourself per kilometer no other car-related costs can be put in the bookkeeping
and this car must be registered for company road tax, even though it is not owner by the company.