Features of a relative’s car rental

Using a car by an employee of an enterprise is a fairly common situation today. But at the same time, questions arise regarding registration of legal relations with employees of the enterprise. Let us consider some of them:

If the employee is not the actual owner of the car, what are the risks of the entity? If there are risks, how to arrange such relations in order to avoid them?
Is there a risk of recognizing the provision of fuel and lubricants in such a business transaction by the sale of fuel?


Registration of relations with the employee on the use of his car in the economic activities of the enterprise

In practice, the following options for registration of legal relations on the use of cars by employees of the enterprise are distinguished:

an agreement on compensation for the use of a personal car and an order on the use of an employee’s car in the enterprise’s activities with payment of compensation;
a lease agreement for such a car and an act of car transfer and acceptance under a lease agreement;
contract for gratuitous use (loan) and an act of car transfer and acceptance under the contract.

According to Article 125 of the Labor Code as of 10.12.1971 (further – the Labor Code), workers using their tools for the needs of an enterprise, institution, organization are entitled to compensation for their depreciation. Moreover, the amount and procedure for payment of this compensation, if they are not installed centrally (and they have not yet been established), according to the Labor Code, are determined by the owner or his authorized body (that is, the administration) in agreement with the employee.

The execution of lease or loan agreements is a rather complicated process, because, firstly, such agreements must be notarized in accordance with Article 799 and 828 of the Civil Code of Ukraine as of 16.01.2003, No. 435-IV (further – the Civil Code), secondly, every time when using a car for the enterprise it is necessary to draw up car transfer and acceptance acts (first from the employee to the enterprise, and then upon returning from the enterprise to the employee). In addition, to confirm the cost of paying the rent (and it doesn’t happen to be free, this is evidenced by the very definition of a lease agreement under Article 759 of the Civil Code); Therefore, the most commonly used option is the compensation agreement (it must be noted in the agreement that it is concluded in accordance with Article 125 of the Labor Code). The cost of compensation is usually equal to the monthly depreciation of the car.

In our opinion, legal relations under Article 125 of the Labor Code must be issued with the owners of cars that are employees of the enterprise. In other cases, if the car belongs to a relative of the employee or his acquaintance, such legal relations must be formalized under a lease or loan agreement.

In practice, transferring a car under a gratuitous loan agreement is a rare occurrence. Since the car is a source of increased danger, and the use of the car by an employee with payment of compensation means that the employee himself is responsible for possible harm to the life, health and property of third parties. And if the car is rented by an enterprise – the enterprise is responsible. Therefore, HLB Ukraine sees the following risks:

the fiscal approach of the STS to the person who provided the technical passports of their relatives, in terms of personal income tax on this person – the rate is 18% and the military fee – the rate is 1,5%. This tax will be mandatory if the company is a tax agent
article 125 of the Labor Code stipulates that «… employees who use their tools for the needs of an enterprise, institution, organization, are entitled to compensation…», therefore, the risk is that these are actually and not legally his tools (but a third party), so the contract can be declared invalid, and everything received under the invalid contract is subject to return to the state budget.


Using fuel cards and providing them to company employees

Fuel sales are any transactions involving the physical transfer (dispensing, shipment) of fuel with or without transfer of ownership of the fuel, for a fee (compensation) or without payment in the customs territory of Ukraine from an excise warehouse.

If enterprise does not physically transfer fuel (does not release, does not ship), then such transactions do not apply to transactions for the sale of fuel in the understanding of item 14.1.212 of the Tax Code of Ukraine as of 02.12.2010, No. 2755-VI (further – TCU).

There are no risks of fuel write-offs.


Write-off of fuel and lubricants

Do you have to use a way-bill?
Is it possible to issue a way-bill per month?
It is necessary to draw up route sheets in addition to way-bills, what information should be reflected in them?
What documents can be a confirmation for the write-off of fuel and lubricants (instead of the above)?

According to item 44.1 of the TCU, for tax purposes, taxpayers are required to keep records of income, expenses and other indicators related to the determination of objects of taxation and/or tax obligations, based on primary documents, accounting registers, financial statements, other documents related to the calculation and payment of taxes and fees, the conduct of which is provided by law. Taxpayers are prohibited from forming indicators of tax reporting, customs declarations on the basis of data not supported by documents specified in paragraph 1 of item 44.1 of the TCU.

Order of the State Statistics Service of Ukraine as of 19.03.2013 No. 95 invalidated the Order of the State Statistics Committee of Ukraine «On the Approval of the Standard Form for the Primary Record of Operation of an Official Car and the Instructions on the Procedure for its Application» as of 17.02.1998 No. 74 (further – Order No. 74). The above-mentioned normative act, which has expired, approved the form of the way-bill, which was recently used as the primary document for writing-off fuel for refueling vehicles.

Despite the fact that it is not necessary to fill in the way-bills, so far most enterprises and organizations use the form for primary documents for writing-off of fuel. And, as practice shows, it is the way-bills that the regulatory authorities require when conducting inspections to confirm the costs associated with determining tax liabilities. It is worth noting that such requirements of the regulatory authorities are unreasonable, since, as noted above, the current legislation does not provide for the obligation to issue waybills. At the same time, the form of the specified document fits the definition of «primary documents».

According to Part 1 of Article 9 of the Law of Ukraine «On Accounting and Financial Reporting in Ukraine» as of 16.07.1999, No. 996-XIV (further – the Law No. 996-XIV), the basis for the accounting of business transactions are the primary documents fixing the facts of business transactions. Primary documents must be prepared during the implementation of the business transaction, and if this is impossible, immediately after its completion. To control and streamline the processing of data on the basis of primary documents, summary accounting documents can be prepared.

As defined in item 2.7 of the Order of the Ministry of Finance of Ukraine «On Approval of the Regulation on Documentation of Records in Accounting» as of 24.05.1995, No. 88 (further – Order No. 88), primary documents are prepared on letterhead of standard and specialized forms approved by the relevant government authority. Documentation of business transactions can be carried out using self-made forms, which must contain the required requisites or details of standard or specialized forms.

Thus, in the absence of new forms or forms for writing-off fuel (instead of way-bills), an enterprise is not deprived of the right to use any other documents to confirm fuel consumption, with one requirement: such documents must meet the requirements of the law on the availability of details of primary documents.

According to Part 2 of Article 9 of the Law of Ukraine No. 996-XIV, primary and consolidated accounting documents may be drawn up on paper or machine media and must have the following mandatory details:

name of the document (form);
date and place of preparation;
name of the entity on behalf of which the document is drawn up;
the content and volume of the business transaction, the unit of measurement of the business transaction;
positions of persons responsible for carrying out business transaction and the correctness of its execution;
personal signature, analogue of a handwritten signature or signature, equated to a handwritten signature in accordance with the Law of Ukraine «On electronic digital signature» as of 22.05.2003, No. 852-IV, or other data allowing identification of the person who participated in the business transaction.

As the Ministry of Infrastructure of Ukraine explained in its Letter «On Primary Documents Confirming the Taxpayer’s Expenses» as of 23.04.2013 No. 4492/25/10-13, the actual spent fuel and lubricants for vehicles are written-off on the basis of way-bills in accordance with the actual cost of the spent fuel, taking into account the norms of fuel and lubricant consumption in road transport, approved by the Order of the Ministry of Transport of Ukraine as of 10.02.1998, No. 43. Business entities can use independently prepared forms of primary documents, including way-bills, which must contain details of standard or specialized forms, provided for in item 2.7 of Order No. 88.

As practice shows, most enterprises use way-bills as primary documents, made on the basis of the form approved by Order No. 74, which has lost force.

In this case, a mandatory requirement is that the entity develops a «way-bill» or other document that contains the details required by law for the preparation of primary documents.

It should be noted that the current legislation of Ukraine does not limit business entities in the frequency of issuance/execution of these documents. So, the requirement for the daily issuance of a way-bill was in item 2.1 of Order No. 74. Currently, this Order has lost the force, there is no other regulatory document that would regulate this issue.

In this regard, we believe that entity has the right to issue way-bills/other primary documents at any frequency, including once per month. It would be advisable for the employees to write the route of the trip in the way-bill, it is not necessary to separately compose the route sheets.

September 2, 2019

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