Fueling Company Car Outside of Business Hours. Tax Consequences
Many accountants in Ukraine get concerned when they hear about employees fueling company vehicles outside of the usual business hours. After all, doing so may result in additional tax liability i.e., additional personal income tax amounts with the "natural" coefficient, and additional military tax amounts. The company might also have to prove that an employee had to work on their day off if the car was filled up on a weekend.
However, let us not jump to hasty conclusions. Instead, we at Accountor Ukraine are going to take a look at what can (or cannot) happen in some very different situations related to company vehicles.
Fueling Company Car After Working Hours
The first case we are going to analyze is an employee fueling their company car after the end of their working hours, provided that their schedule is 9:00 a.m. to 6:00 p.m. five days a week.
The laws of Ukraine do not prohibit transactions related to the purchase or receipt of fuel on behalf of companies outside of the business hours. So, if you fuel a company car during non-working hours in order to drive it during your working hours only, and if you have all the relevant source documents, there will be no accusations of using a company car for personal use.
Fueling Company Car When on Business Trip
If the manager of the company sends an employee on a business trip, and the employee refuels their company car on the way back home after 6 pm under certain circumstances (which must be indicated in the employee’s reports), there is no indication that the company vehicle is being misused.
Fueling Company Car on Weekends: Personal Use
The fact of filling up a company car (if confirmed by relevant documents) only indicates that an employee has committed a legally significant action on behalf of the company: purchasing fuel. The way this fuel is used can be traced in waybills or other source documents the company has. Therefore, receiving or purchasing fuel on a day off work does not always mean that the gas shall be used by the employee on their day off and/or not for business purposes.
Normally, we advise that the employees avoid filling up their company cars on weekends, or that they provide proof of the circumstances urging them to do so (preparing for a business trip, irregular working hours, etc.). However, we also suggest analyzing the situations when employees fill up a company car on their day off and use the car for personal use.
Using Company Car for Personal Use: Taxation
- For businesses: getting additional tax liability – i.e., additional VAT amount for misuse of company resources;
- For the employee: the cost of gas that was used outside of the business is a fringe benefit and is taxed as one – i.e., the tax liability includes personal income tax with the “natural” coefficient and the military tax.
Can you sue? Yes, but there is no certainty you will win. On the one hand, the tax authorities cannot prove the fact that the gas was not used for business purposes, but on the other hand, filling up company cars on weekends is allowed only when that day becomes a working day for certain employees. If that is the case, documents must be prepared to prove that the employee(s) had to work on that particular day, and the company must either pay double wage for that day, or give the employee(s) another day off.
As you can see, there is no one-size-fits-all solution to situations related to filling up company cars outside of business hours. However, it is always important to keep notes and prepare the relevant documents you can later use to explain what happened. We at Accountor Ukraine will be happy to help you with that, as well as with any other matters related to doing business in Ukraine (accounting, reporting, legal advice, etc.).
