What is the VAT for Corporate Car Rental?
Individual or corporate car rentals are preferred by various individuals and companies due to the different advantages they offer. High vehicle taxes have driven both individuals and companies to prefer long-term car rentals over purchasing vehicles. This can be especially profitable for firms that need multiple vehicles, as they can benefit from tax advantages in this area. Particularly in Ankara, fleet rentals provide unique tax advantages.
Car rental expenses include withholding tax and VAT rates. The withholding tax rate paid as tax is equivalent to 20% of the car rental fee. Another item among the expenses of rental cars is the VAT, which is 20% of the rental fee. To illustrate with a simple example, for a car with a rental fee of 1,000 TL, 200 TL must be paid as VAT.
Car rental tax is one of the items that companies can deduct from their corporate tax and is regulated in the General Communiqué on Income Tax No. 317. Under this application, expenses related to the rental, purchase, and other expenses of rented or actively registered passenger or commercial vehicles are limited. You can find detailed information about car rental accounting records in this article.
It is possible to show car rental as an expense. Company cars or vehicles can be rented or registered in the company's name. In both cases, a significant portion of the expenses related to the vehicle can be shown as expenses. This includes fuel, parking, vehicle repair expenses, tolls, and highway fees. It is important to note that both car rental and passenger car expenses are subject to various restrictions under Law No. 7194.
Regarding car rental accounting, up to 70% of these expenses can be shown as expenses. The remaining 30% of the expenses can be recorded as "non-deductible expenses" in the accounting records of passenger cars under Article 40/5 of the Income Tax Law.
If there is an accounting record for car rental from a company, the procedure is quite simple. The company from which you rent the vehicle issues a rental invoice on behalf of your business. This invoice can be recorded as a marketing and general administrative expense. This way, you can complete the accounting entry for car rental.
If you rent a vehicle from a non-taxpayer person or institution, you are responsible for covering the withholding tax and VAT expenses. Such rental transactions are usually preferred for passenger cars. According to Article 70 of the Income Tax Law, the withholding tax rate on rents is 20% of the rental amount.
Payments made to companies renting vehicles from non-taxpayer individuals or companies are called Real Estate Income or rental income. These payments are subject to a 20% withholding income tax and 20% VAT. Additionally, a Stamp Duty Declaration of 0.15% is required by the contract.
According to Article 40/5 of the Income Tax Law, vehicle expenses can be deducted from the relevant company's earnings. The subject vehicles can be registered actively or included in the business through rental. VAT withholding refers to withholding tax. The service mentioned in the rental contract can be priced in terms of service, driver, and rental. In this case, 9/10 of the payment for the driver service and 5/10 for the rental is withheld. You can easily calculate these withholding taxes with just a few clicks.
The conditions for showing car rental invoices as expenses are regulated in the General Communiqué on Income Tax No. 313. According to this communiqué, the amount that can be shown as an expense in car rental accounting has been increased from 8,000 TL to 15,000 TL. Therefore, rental fees exceeding 15,000 TL cannot be written off as expenses. Additionally, no VAT deduction can be made for amounts exceeding the specified limit. To show how the accounting record of a rented car can be shown as an expense:
If the monthly rental fee for a BESA registered car is 16,000 TL,
For each expense, KKEG and the amount to be recorded as an expense must be considered. You may consider the fleet rental option long-term to protect your company from significant expenses.
Articles 13 and 14 of Law No. 7194 and Articles 40 and 68 of the Income Tax Law impose restrictions on vehicle expenses incurred by businesses through rental or purchase. Vehicles rented for the partial or complete rental or various operations of passenger cars are included in this scope. The restriction on vehicle rental expenses for passenger cars is 70%. This amount can change annually.
Monthly rental expenses for vehicles obtained through rental can be shown as expenses up to 15,000 TL in 2023 and deducted from taxable income. Additionally, maintenance and fuel expenses for rented vehicles can be reflected in taxes at a rate of 70%. The percentage of Motor Vehicle Tax (MTV) that is non-deductible is also the responsibility of the fleet companies.
