Change in the additional taxation of a vehicle used for both business and private purposes
Change in the additional taxation of a vehicle
The amendment reduced the calculation of non-monetary income in the case when free low-emission motor vehicles (e.g., an electric car or vehicle combining an internal combustion engine and electric motor) are provided toemployees for both business and private purposes, specifically up to 0.5% of the entry price of the vehicle.
According to Section 6 (6) of the Income Tax Act, a low emission vehicle, in the case of passenger road vehicles, is understood to mean a vehicle not exceeding the emission limits specified in Section 3 (a) of Parliamentary Document No. 160 (pursuant to the definition to the end of 2025, it is a category M1, M2 or N1 road vehicle that does not exceed the CO2 emission limit of 50 g/km and 80% of the emission limits for real-time air pollutants pursuant to Annexe I to the directly applicable European Union regulation regulating the type of motor vehicles from the perspective of light passenger vehicle emissions).
Thus, starting from 1.7.2022, a distinction will be made whether or not it is a low-emission vehicle and, accordingly, when determining non-monetary income from employment, a rate of either 1% or 0.5% will be applied for the given calendar month.
According to the amendment, in cases where employees are provided more than one of the employer's motor vehicles free of charge for both business and private purposes one after another during the calendar month, of which only some are low-emission, a rate of 0.5% will be used in the given calendar month when determining the income from employment if the low-emission motor vehicle is the vehicle with the highest entry price.
When more than one motor vehicle is provided by the employer at the same time during the course of one month, of which only some are low-emission, the income from employment from that use shall be determined in two subsequent steps. In the first of these steps, the income from the dependent activity related to the use of conventional motor vehicles (not low-emission) shall be calculated separately and the income related to the use of low-emission motor vehicles shall be calculated separately. The calculation shall be made by multiplying the total entry price of one or the other category of vehicles by the rate of 1% (in the case of conventional motor vehicles) or by the rate of 0.5% (in the case of low-emission vehicles). In this way, the taxpayer obtains two amounts, which it subsequently adds up, thereby determining the amount of income from the dependent activity for the calendar month in question.
Despite the fact that the amendment is effective from 1 July 2022, the amendment will apply to the entire tax year of 2022 and, after the end of 2022, as part of the annual settlement of advances or in the employee's tax return.
On 30.6.2022, the Financial Administration issued information on how employers (payers) should proceed when calculating the annual settlement of advances or when issuing a Certificate of Taxable Income from Employment if the employee submits his own tax return for 2022. You can find the full text HERE: