With the increasing number of electric cars on our roads, we are increasingly faced with the question of how to properly tax the purchase and installation of charging stations from the employer's perspective and, in some cases, from the employee's point of view. It is also necessary to set up a methodology for monitoring and subsequent tax reconciliation of private electricity consumption for company electric vehicles, or compensation to employees if they also use their private electric car for work purposes.
Provision of a charging station to an employee
Under certain conditions the charging station can be considered as a car’s accessory, it can be provided to the employee as a separate item (it remains under the ownership of the employer), or it can become part of the real estate. In this article, we will focus on the first two options.
a) Car’s accessory
If the charging station is a car’s accessory, from the point of view of personal income tax, the employee’s monthly non-monetary income in the amount of 1% of the purchase price of the car will be subject to taxation and social security and health insurance contributions will also be paid.
From the VAT point of view, the right to deduct input VAT will be adjusted in the same way as for a car. Thus, when a car is used by an employee for both corporate and private use, the right to deduct input VAT will be reduced in proportion to the extent of use for economic activity.
The purchase price of the charging station, which was purchased additionally as an accessory to a car at a purchase price of up to CZK 80,000 (inclusive), can be applied from the point of view of corporate income tax as a one-time expense under certain conditions.
b) Separate item
If the charging station is provided to the employee as a separate item, which remains the property of the employer, from a personal income tax perspective, it is also the employee’s taxable income, where the value of the benefit corresponds to the price of the charging station in the ratio of private kilometres to the total number of kilometres driven. It is possible to calculate the value according to its expected lifetime and add the appropriate proportional part every month. Income is also subject to social security and health insurance contributions. On the other hand, the employee may claim from the employer the reimbursement of costs related to the location of the charging station and its use for work purposes (the reimbursement of these costs will not be subject to personal income tax from dependent activity or social security and health insurance contributions). The employee must be able to substantiate this entitlement.
From the VAT perspective, the right to deduct input VAT is regulated similarly to a car. Thus, if the car is used by an employee for both corporate and private use, the right to deduct input VAT would be reduced in proportion to the extent of the use for economic activity. We would like to point out that if this charging station is considered a fixed asset (as defined for income tax purposes), the amount of the proportional right to deduct input VAT must be monitored for five years.
If, from the perspective of corporate income tax, the charging station is not a car’s accessory but a separate piece of property, its purchase price can be fully considered as tax deductible cost or accrued over certain period of time, provided the purchase price is up to CZK 80,000. If the purchase price is higher than CZK 80,000, it will represent an individual tangible fixed asset included in the 3rd depreciation group.
For VAT purposes as well as for determining the amount of electricity consumption for private purposes, the obligation to keep a log book in order to prove the existence of the right to deduct input VAT and the amount of the tax-deductible expense continues to apply. We recommend that you check with your car supplier the possibility of using the log book as a user application, which is usually available in newer models.
In the case of electricity consumed during charging in the employee’s household, it is not possible to exercise the right to deduct input VAT. However, the employee is entitled to financial compensation for electricity in the actual proven amount consumed for business purposes. Since the calculation of the actual price of consumed electricity on a domestic charge is quite complicated, there is a possibility to use the so-called reference price for electricity, which is based on the Decree of the Ministry of Labour and Social Affairs of 15 December 2021 and for 2022 amounts to CZK 4.10 per 1 kilowatt hour of electricity. Travel compensation is not subject to personal income tax for employees, and social security and health insurance contributions are not paid therefrom.
If the employee recharges the electric car at the employer premises, he should pay the employer the value of the electricity consumed, including VAT. In the event that the amount corresponding to the consumption of electricity for private purposes is not paid by the employee, the employer is obliged to tax this amount to the employee within the payroll records and to pay social security and health insurance contributions from this amount. Even in this case, it is possible to determine the price of electricity based on the actual price, or it is possible to use a reference price, as described above. From the VAT perspective, it is then necessary to reduce the right to deduct input VAT in proportion to the private use of electricity, or to apply output VAT.