{"id":7477,"date":"2017-12-22T10:30:02","date_gmt":"2017-12-22T10:30:02","guid":{"rendered":"https:\/\/www.darian.ro\/?p=7477\/"},"modified":"2019-02-01T13:21:04","modified_gmt":"2019-02-01T13:21:04","slug":"frequent-mistakes-in-deducting-car-expenses","status":"publish","type":"post","link":"https:\/\/www.darian.ro\/en\/frequent-mistakes-in-deducting-car-expenses\/","title":{"rendered":"Frequent mistakes in deducting car expenses"},"content":{"rendered":"

Companies the business of which involves the use of a fleet of motor vehicles should pay more attention to the conditions in which they can deduct 100% of the expenditure on motor vehicles when calculating their corporate tax. In practice, the tax audits identified multiple situations in which companies did not correctly apply the legal provisions in question or did not provide the necessary documentation to justify the right to deduct in full the expenses for vehicles. In such situations, the tax authorities have established additional corporate tax and related late payments – in the context of a tax inspection covering several tax years and for companies owning \/ using a large number of motor vehicles, the additional amounts set by tax authorities may be significant.<\/p>\n

Legal Provisions<\/strong><\/h4>\n

According to Article 25, paragraph (3), section l) of the Tax Code, companies may deduct in the calculation of corporate tax \u201c50% of the expenses related to motorized road vehicles not exclusively used for economic activity<\/strong>, with a maximum total weight not exceeding 3,500 kg and not having more than 9 passenger seats, including the driver’s seat, owned or operated by the taxpayer. These costs are fully deductible for those situations in which vehicles fall into any of the following categories:<\/em><\/p>\n

1. Vehicles used exclusively for emergency services, security and protection services and courier services;
\n2. Vehicles used by sales and purchasing agents;
\n3. Vehicles used for the carriage of passengers, including taxi services;
\n4. Vehicles used for the provision of paid services, including for hire to others or for training by drivers\u2019 schools;
\n5. Vehicles used as merchandise for commercial purposes.<\/em>”<\/p>\n

Normele metodologice de aplicare a Codului fiscal expliciteaz\u0103 prevederile Codului fiscal enun\u021bate de mai sus, prin men\u021bionarea modalit\u0103\u021bii prin care se poate justifica utilizarea vehiculelor \u00een scopul deductibilit\u0103\u021bii integrale: \u201cjustificarea utiliz\u0103rii vehiculelor, \u00een sensul acord\u0103rii deductibilit\u0103\u021bii integrale<\/strong> la calculul rezultatului fiscal, se efectueaz\u0103 pe baza documentelor financiar-contabile \u0219i prin \u00eentocmirea foii de parcurs<\/strong> care trebuie s\u0103 cuprind\u0103 cel pu\u021bin urm\u0103toarele informa\u021bii: categoria de vehicul utilizat, scopul \u0219i locul deplas\u0103rii, kilometrii parcur\u0219i, norma proprie de consum carburant pe kilometru parcurs.\u201d<\/em><\/p>\n

he methodological rules for the application of the Tax Code explain the provisions of the Tax Code outlined above, by specifying how to justify the use of vehicles for the purpose of full deductibility: \u201cthe justification for the use of vehicles for the purpose of granting full deductibility<\/strong> to the calculation of the tax result is based on financial and accounting documents and by drawing up a roadmap<\/strong> which shall include at least the following information: the category of vehicle used, the purpose and location of the journey, mileage, the own standard of fuel consumption per kilometer.<\/em>”
\nMoreover, the Methodological Rules specifically specify that: “Expenditure on motorized road vehicles subject to tax constraint includes expenditure directly attributable to a vehicle, such as: local taxes, compulsory motor third party liability insurance, periodic technical inspections, vigniette, rents, non-deductible part of value added tax, interests, commissions, exchange rate differences recorded as a result of contracts other than leases.<\/em>”<\/p>\n

Practical aspects<\/strong><\/h2>\n

In view of the mistakes encountered in practice in the interpretation and effective application of the legal provisions outlined above, we highlight the most important aspects to be considered when determining the tax treatment applicable to the costs of motor vehicles owned or operated by companies:<\/p>\n

1. Firstly, the Tax Code mentions that the 50% limitation of costs applies to motor vehicles which are not exclusively used for economic activity. Therefore, a deduction of 100% applies only to cars used exclusively for the business of the company<\/strong>.<\/p>\n

If, for example, the company offers the possibility for its employees to travel with the company’s vehicles on the tour-return journey from the workplace to their home, then it is considered that the vehicles are also used for personal purposes by the employees of the company and therefore the 50% limit should be applied.<\/p>\n

2. Even for situations where the law provides for a full deduction of car costs, companies must draw up roadmaps – an essential condition specified by the law. Increased attention should be paid to items that are included in the roadmaps. Companies often fail to meet the minimum requirements imposed by tax legislation.
\nThe roadmaps must include the following information:<\/strong><\/p>\n