Taxation Situation of Cars Rented From A Non-Taxpayer
Many corporations prefer using cars of non-taxpayers or their personnel to process their trading operations due to financial advantages. Procedures and points that require close attention will be mentioned in this article.
Whether it is one-time trading operation or multiple, in order to avoid any possible vagueness and identify responsibilities of both parties, a contract must be agreed upon and signed. It is beneficial to include issues in the contract such as which party will make the payments of car insurance and vehicle maintenance. In this trading operation, two parties, car renter and car owner, will have different responsibilities. Therefore, firstly, we will examine the ‘car renter’.2
Documents based on the entries that will be made in commercial books are identified in Tax Procedure Law. Invoices, consignment invoices, notes of expenses and bank receipts are some of these documents. Car owner unable to issue an invoice due to the fact that the car is rented from a non-taxpayer and renter should foster this situation by preparing notes of expenses. This situation is regarded as an ‘income from immovable capital’3 for the car owner. Therefore, 20% of the payment that will be made to the car owner is income tax and the rest of the amount will be paid back to him/her. Additionally, due to Value-Added Tax Law (VAT), 18% of reverse charge VAT must be calculated through the gross amount and must be paid to the financial administration with VAT2 declaration. For example, in a situation in which monthly rental value is 1.000 TL (gross amount), calculations will be as it is demonstrated below:
| Gross Amount | 1.000-TL | Will be registered as an expense. |
| Income Tax %20 | 200-TL | Will be paid to the financial administration through withholding tax declaration |
| Net Amount to Be Paid | 800-TL | Will be paid to the car owner |
| Reverse charge VAT to Be Calculated | 180-TL | Will be paid to the financial administration with VAT2 declaration and will take place in deductible VAT calculations. |
Let us examine from the point of car owner:
Income gained by the natural persons are declared to tax offices every year on March. Rentiers, people with security income, wage earners from more than one employer etc. must be examined according to their income and must file income tax return If their income is in the declarations limits. Let us exemplify the situation of the car owner.
In our first example, let us assume that car owner has wage income. In addition to monthly car rental income of 1000 TL (gross amount), he/she has a wage income of 5000 TL4 per month. In this case:
| Rental income (Annual) | 1.000 x 12 = 12.000-TL | This income, which is subject to deduction, does not exceed the second bracket (29.000 TL)5 of Income Tax Tariff. Therefore, it cannot be included in the declaration |
| Wage income (Annual) | 5.000 x 12 = 60.000-TL | It cannot be included in the declaration due to the fact that he/she did not have a wage income from more than one employer. |
| Result | No need to submit a declaration | |
In our second example, let’s assume that the car owner has a wage income from multiple employers. In addition to monthly car rental income of 1000 TL (gross amount), he/she has a annual wage income of 50.000 TL from his/her first employer and 30.000 TL (annual) from his/her second employer. In this case:
| First Employer Wage Income (Annual) Second employer wage income (Annual) | 50.000-TL 30.000-TL |
Person has an income from more than one employer. Due to the fact that the income after the first employer exceeds the second bracket (29.000 TL) of Income Tax Tariff, total amount must be included in the declaration. |
| Rental Income (Annual) | 1.000 x 12 = 12.000-TL | This cut income does not exceed the second bracket (29.000 TL) of Income Tax Tariff. However, it can be added to the declaration since a declaration must be given because of the wage income. |
| Result | A declaration must be given. | |
For detailed information, please, contact with your customer service representative or an expert.
REFERENCES
- Wage Earning Tax Guide-2015 , GİB
- Declaration Regulation Guide for Rentiner-2015 , GİB
- www.gib.gov.tr
- Tax Procedure Law
- Revenue Law
1One who is not a taxpayer due to his/her trading operations (excluding wage income tax).
2A car renter is a taxpayer.
3Income Tax Law, item 70
4This is net amount after social security contribution, unemployment Premium and other factors are taken out of gross amount.
5According to income tax tariff
