Private use of a company car and 1 % of the purchase price
If an employee or a managing director also uses a company vehicle privately, the rules on benefits in kind come into play. Private use of a company car is generally linked to taxing a certain percentage of the vehicle's purchase price. This article explains the principle and shows how an accurate mileage log simplifies the whole process. The framing follows Slovak tax practice; check the rules in your own country.
How private use of a company car is assessed
Where a vehicle is also made available for private journeys, private use of a company car is generally treated as a benefit in kind for the employee. Income tax law works here with a percentage of the vehicle's purchase price for each month of use.
The exact method of calculation, the percentage and any reduction of the value over time are set by legislation and depend on the specific circumstances. Always leave the calculation to your accountant or payroll specialist.
What 1 % of the purchase price means
The principle of 1 % of the purchase price means a proportionate share of the vehicle's value is added monthly to the income of the person who also uses the car privately. It is a simplified way of taxing the benefit arising from private use.
The specific application, the calculation base and any adjustments in later years of use are governed by the legislation in force. We set out the principle in general terms – verify the exact figures with a professional.
Why distinguishing journeys matters
To be able to prove the extent to which the vehicle is used privately and to what extent for business, you need credible records. A mileage log is precisely the document that shows the character of individual journeys.
During an inspection you can therefore evidence which kilometres were business and which private. Without records the extent of use is hard to prove and needless misunderstandings with the tax administrator become likely.
How SaveTrack helps
SaveTrack automatically records all of a vehicle's journeys and lets you mark each of them as business or private. That produces an unambiguous overview serving as documentation for both payroll and tax purposes.
An export for your accountant is available quickly and with no manual completion. The data updates with a latency of around 60 seconds while driving, so you have a current overview of vehicle movement.
What not to forget
Private use of a company car has both tax and payroll implications, and assessing them depends on the specific situation – the form of the relationship, how the vehicle was made available and its purchase price. This article therefore serves only as basic orientation.
Always discuss the specific calculation and how it feeds into payroll or tax with an accountant or tax adviser. SaveTrack will supply precise documentation on the extent of the journeys.
FAQ
When does taxation of private use of a company car arise?
Generally when an employee or managing director also uses a company vehicle for private purposes. It counts as a benefit in kind. Leave the precise assessment to your accountant.
How is 1 % of the purchase price calculated?
The principle is to add a proportionate share of the vehicle's value to income for the months of use. The specific calculation and any adjustments are governed by income tax law.
Do I need a mileage log if I pay a percentage of the purchase price?
Journey records help prove the extent of business and private use. We recommend discussing the specific need and the method of record-keeping with a tax adviser.
How does SaveTrack help with company cars carrying a benefit?
SaveTrack records journeys automatically and lets you mark them as business or private. You thus obtain clear documentation for both payroll and tax purposes, plus an export for your accountant.
Need a clear overview of business and private journeys? SaveTrack creates it automatically. Contact: +421 908 918 880, info@savetrack.sk.
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