Can car rental be included in company expenses?

Are you an entrepreneur who aims to achieve income that will be satisfactory? You will certainly need a company car. You can conveniently rent such a work tool and not worry about your own contribution, leasing or a loan with high interest. A rented car can be included in your company's costs, but then it is necessary to follow a few rules - which ones?

What does car rental for business purposes look like?

Renting a car is a fairly popular alternative to buying or leasing – especially for companies that want financial flexibility and minimize long-term obligations. By choosing to rent, companies avoid having to invest significant amounts of their own money in purchasing vehicles.

A huge advantage of renting a car for business purposes is the predictability of costs. Monthly fees are set at the beginning of the contract and do not change throughout its duration. This allows companies to better plan their finances and avoid unexpected expenses related to owning a vehicle, such as its depreciation or sudden breakdowns.

In addition, rental costs, including the monthly installment and operating expenses, can be fully included in the costs of obtaining income, which leads to a reduction in the tax base and, consequently, the total tax burden of the company.

In practice, optimizing tax burdens through car rental requires proper documentation of all expenses related to vehicle operation. Including rental costs in company costs is not only the rental installment, but also fuel, service, insurance and other possible operating costs.

It is important that the rental agreement is carefully drafted and contains clear conditions regarding the scope of use of the vehicle, responsibility for its technical condition and regulations regarding termination of the rental.

Car rental vs. leasing

Are you wondering what is better to choose – long-term car rental or maybe leasing? In the case of a passenger car, the best solution will be the one that best suits your needs. However, before you decide, see our comparison.

Flexibility in the contract

Car hire usually offers more flexibility than leasing. Rental agreements can be tailored to the changing needs of the business, with short and long-term options without the need for long-term commitments. In leasing, companies are often required to adhere to the agreement for a specified, usually longer period, which can be disadvantageous when business requirements change. At MobiCars, car hire agreements are clear and written in plain language, so every entrepreneur knows exactly what they are signing.

No capital commitments

Renting a car doesn’t require a down payment or down payment, which is often required with leasing. This makes renting more accessible to new or smaller businesses that don’t want to strain their cash flow.

Access to new technologies

Car rental companies, including MobiCars, often update their fleet with the latest models, so that companies can benefit from the latest technology. In leasing, the company is obligated to use the same vehicle for the entire contract period, which limits access to new vehicles.

No risk of vehicle depreciation

At the end of the lease, the company simply returns the vehicle, without worrying about resale and depreciation. In leasing, the decision to buy the vehicle at the end of the agreement involves risk related to its residual value.

Is a rental car a tax-deductible expense?

A rental car can be considered a business expense, but there are certain conditions that must be met for this to happen. If you want to include the rental car fee in your business expenses, the vehicle must be used for business purposes.

This means that the car should be used for business purposes, such as meetings with clients, delivering goods or commuting to a place where services are provided. Take care of other details as well:

• Documentation – all costs associated with car rental must be properly documented. Invoices and rental agreements should be kept as evidence of the use of the vehicle for business purposes. Additionally, in the case of a mix of private and business use of the vehicle, a detailed record of the vehicle mileage should be kept so that only those costs that actually relate to business activity can be settled.
• Cost sharing – if a car is used for both private and business purposes, the rental costs should be divided accordingly. Only the portion of costs corresponding to the use of the car for business purposes can be included in the costs of obtaining income.
• Additional costs – in addition to the rental fee itself, other expenses related to the use of the car, such as fuel, insurance, servicing and repair fees, may also be included in the tax deductible costs, provided that they are related to business activity.

Long-term rental – can it be included in company costs?

Car rental is a commonly used solution by many companies that value flexibility and the ability to optimize operating costs. One of the main advantages of deciding to rent is the ability to include expenses for this purpose in the costs of obtaining income. How does the settlement of costs for renting a passenger car look like?

• General principles – vehicle rental costs can be included in the costs of earning income, as long as the car is used for business purposes. This means that rental expenses must be adequately documented and clearly related to the company's activities.
• Types of deductible expenses – deductible expenses include not only monthly rental payments but also any additional costs associated with operating the vehicle, such as fuel, insurance, servicing and repairs. It is important that all of these expenses are accurately recorded and reflected in the company’s accounting records.
• Deduction Limit – If you use your vehicle for both business and private purposes, you may need to split the costs accordingly. Only the portion of your expenses that is consistent with your business use of the vehicle can be claimed as a business expense. Mileage records, such as mileage records, may be required to properly account for the costs.
• Tax aspects – including car rental expenses in the costs of obtaining income allows for a reduction in the tax base, which directly translates into a lower amount of income tax due from the company. This is particularly beneficial for companies, which can optimize their tax burden in this way.
• Contract terms – it is important that the terms of the lease are clearly defined in the contract, and that the contract itself precisely defines the scope of use of the vehicle for business purposes. This type of clarity is crucial to avoid later ambiguities during potential tax audits.