Pursuant to the effective Income Tax Act and Regulation No. 164, an employer can pay compensation for the employment-related use of an employee's personal car (i.e. a car that is not in the ownership or possession of the employer) to the employee without income and social tax in two ways. If records of employment-related trips are kept pursuant to the procedure established with the regulation of the Government of the Republic, the tax-exempt compensation that may be paid is up to 0.3 euros per kilometre of an employment-related trip, but not more than 256 euros per month. The estimated compensation that may be paid tax-free is up to 64 euros per month if the required records are not kept.
The latter option is no longer available pursuant to the amendments to the Income Tax Act that enter into force on 1 September 2014, and records of trips must be kept in any case in order to pay tax-exempt compensation for the employment-related use of personal cars.
The regulation has no independent impact, as it will be made to comply with amendments to the Income Tax Act that allow the employer to compensate the employment-related use of personal cars to employers to a larger extent than before. Abolishing the tax exemption on the estimated 64-euro compensation for the employment-related use of an employee's personal car increases the administrative burden of companies somewhat. The additional administrative burden is not disproportionately large considering that the estimated compensation only covers the expense of small-scale or infrequent employment-related trips and records must already be kept of large-scale trips. The rules of keeping the records are simple and it may be done in free format.
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