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Each year, more and more people are interested in the rules and regulations affecting company cars, so we felt that we should present a comprehensive synopsis about this topic. In our current article, we are going to cover every important detail about company cars, to answer every question that might arise.
The current Motor Vehicle Tax Act and Act on PIT provide the outline of the passenger cars that are subjected to company car tax, as well as the ones that are not subjected to car tax.
From the perspective of company car tax a passenger car is a passenger car based on Act on PIT, excluding the environmentally friendly cars. The environmentally friendly car is the electric car and cars with zero emission. A zero emission car is a car which does not emit air pollutants during its intended use (environmental classification code: 5Z)
The outline defines each of those as follows:
Subjected to company car tax: those passenger cars that are not owned by private individuals or those passenger cars whose costs and expenses have been accounted according to the Accounting Act, or their expenses and depreciation allowances have been written off with the method of itemized expense accounting in accordance with the Personal Income Tax Act.
Not subject to company car tax: Those passenger cars that are owned by private individuals and in connection with the usage, the owners receiving reimbursements, but the itemized costs have not been accounted for.
The registered owner of the passenger car. In the case of several owners (co-owners), they are subjected to company car tax in proportion to their ownership.
In the case of finance leasing, the lessee is subject to the tax.
In the case of a passenger car owned by the Hungarian State, that person or organization holds the passenger car’s trustee rights. If besides the rights of the trustee, there are rights of use that exist too, then the person or organization holds the rights of use.
In case of a passenger car not included in the official register, the person or organization that accounted for expenses for the use of the passenger car.
In the case of passenger cars not owned by private individuals, company car tax liability arises on the first day of the following month of acquisition of ownership, while in the case of passenger cars owned by private individuals, company car tax liability arises on the first day of the month in the preceding month of which the owner claimed any expense for the passenger car.
In the case of private individual owners, on the last day of the month, the owners claim any itemized expense for the passenger car. In the case of non-private individual owners, on the last day of the month, the owners alienate their passenger car. Furthermore, the tax liability terminates on the last day of the month, in which the passenger car is unlawfully alienated or has been destroyed.
The company car tax needs to be self-assessed quarterly (which involves an obligation to assess, declare, and pay the tax) for each month of the calendar year, and its monthly rate depends on the car’s capacity expressed in kW and its environmental category, as follows:
|0, 1, 2, 3, 4 category
|6, 7, 8, 9, 10 category
|5, 14, 15 category
|Over 120 kW
To prevent double taxation, motor vehicle tax can be deducted from the company car tax. If the taxable person persons paid their motor vehicle tax within the applicable deadline, they can deduct their tax for those months of the quarter, in which they were liable for both taxes.
Company car tax needs to be self-assessed. The tax assessment, declaration, and payment need to be submitted quarterly for each month of the calendar year in which the tax liability prevailed by the 20th day of the subsequent month by using the tax authority’s relevant declaration document.
Those passenger cars are exempt from tax and are operated for regular transport of health prevention or curative purposes, social purposes by foundations, public foundations, organizations, and public bodies founded for helping health impaired and disadvantaged people.
The purchase price of the vehicle can be considered as eligible cost by the general rules of the fixed assets, which implies the main rule on accounting and corporate tax base determination that the cost of these assets has to be considered by depreciation method.
The purchase-, upkeep-, maintenance-, repair- and fuel costs can only be enforceable by properly issued invoices.
The private use of company cars provided by the employer, road-use vignettes and tickets in connection with them, according to the Act on Personal Income Tax, are considered as tax free fringe benefits.
Certainly the rules of company cars, affecting the personal income tax, value added tax and corporate tax, are much more complex, thus if you have any additional questions or need further information, please feel free to contact us, our experienced tax advisors would be pleased to help you.