Use of private vehicles for business purposes. New mileage rates.
Through an amendment to the regulation for which the Ministry of Infrastructure is responsible, the mileage amount to which employees who use private vehicles for business purposes are entitled will change. Consequently, the monthly lump sum limits for such employees will also be updated. For most drivers, however, the amounts proposed in the draft will not compensate for rising operating costs. The regulation also does not regulate the reimbursement of employees for the use of, among other things, private electric cars.
In response to the rapidly rising costs of vehicle operation, caused mainly by rising fuel prices, a draft regulation of the Minister of Infrastructure on the use of passenger cars, motorcycles and mopeds not owned by the employer for the purpose of an employee’s business activities was published on the Government Legislation Center’s website on October 11, 2022.
Biggest increase for… mopeds
According to the draft, the costs of using vehicles for business purposes shall be paid by the employer at rates per kilometer of vehicle mileage, which may not be higher than:
1.for a passenger car:
a. with an engine capacity of up to 900 cm3 – PLN 0.89 (currently it is PLN 0.5214),
b. with an engine capacity of over 900 cm3 – PLN 1.038 (currently PLN 0.8358),
2.for a motorcycle – PLN 0.69 (currently it is PLN 0.2302),
3.for a moped – PLN 0.42 (currently it is PLN 0.1382).
On the one hand, the planned changes should be viewed positively, as the current rates have not been changed since 2007. On the other hand, it should be noted that 15 years ago fuel prices were PLN 4.20 (gasoline) and PLN 3.74 (diesel). Currently, they are around – respectively – PLN 6.90 (+64%) and PLN 8.00 (+113%). Meanwhile, thanks to the regulation under discussion, the increase in mileage for the most popular means of transportation used by employees, i.e. passenger cars with an engine capacity of more than 900 cc, is to be only 24%. Higher increases are envisaged for far less frequently used vehicle categories – passenger cars with engine capacity up to 0.9 liters (+71%), motorcycles (+199%) and mopeds (+204%).
On the one hand, the changes should be viewed positively. On the other hand, it should be noted that since 2007, the increase in fuel prices has been much greater than the planned mileage increase for the most popular mode of transportation used by employees, namely passenger cars with an engine capacity of more than 900 cc.
The draft regulation stipulates that it will come into effect as early as the first day of the month following the month of promulgation. This will affect not only the mileage rate, but also the maximum monthly lump sums for the use of employees’ private cars for business purposes, which depend on the mileage limit – specific to the municipality where the employee is employed. They are 300 kilometers (for municipalities with up to 100 thousand residents), 500 kilometers (municipalities with 100 to 500 thousand residents) and 700 kilometers (municipalities with more than 500 thousand residents).
Depending on the size of the municipality – and the mileage limit set for it – the new monthly lump sums will be as follows (current amounts are shown in parentheses):
Kilometer limit | Engine capacity | |
Up to 900 cc | Above 90 cc | |
300 km | 267,00 PLN (156,42 PLN) | 311,40 PLN (250,74 PLN) |
500 km | 445,00 PLN (260,70 PLN) | 519,00 PLN (417,90 PLN) |
700 km | 623,00 PLN (364,98 PLN) | 726,60 PLN (585,06 PLN) |
What about electric cars?
However, the draft regulation does not address the issue of electric cars, which has so far raised many interpretive doubts. For example, in individual tax ruling from 17 November 2021 (ref. 0114-KDIP3-2.4011.437.2021.1.MT), the authority held that since electric cars were not mentioned explicitly in the regulation, the limits indicated therein should not be applied to them, and that the expenses reimbursed to the employee constitute his income from the employment relationship, which is nevertheless exempt from taxation.
However, we can expect the above issue to be regulated, as on August 8, 2022, a draft law on amendments to the Law on Road Transportation appeared in the list of legislative and program work of the Council of Ministers. The description indicates that one of the draft amendments aims to introduce the possibility of reimbursing employees for the use for business purposes of private cars with electric or hybrid propulsion, but also those powered by hydrogen or powered by other alternative energy sources.
Author: Michał Półtorak