Businesses are thinking of ways to reduce operating costs, and the costs associated with operating cars tend to be significant.
The popularity of electric and hybrid vehicles is growing. Businesses are thinking of ways to reduce operating costs, and the costs associated with operating cars tend to be significant. More and more entrepreneurs are thus including hybrid or fully electric cars in their fleets.
Businesses’ cars are driven by their employees, so the question arises, what will happen to the setting of travel allowances for these vehicles? After many years of uncertainty, an amendment to the Income Tax Act clarifies the setting of fuel expenses for electric cars and hybrid vehicles.
While an electric car operates purely on electricity, a hybrid vehicle contains both an internal combustion engine and an electric motor, switching over between the two types of fuel while driving. In some vehicle types, this switchover can be controlled manually and for some it is automatic.
Until 2020, electricity was not defined as a fuel for travel cost purposes. This caused practical problems in demonstrating the value of an employee's costs for fuel consumed (electricity). In 2020, a new rate of basic compensation for the use of road motor vehicles was introduced in a decree specifying the rates for basic compensation, namely the average price of fuel according to Section 158(3) of the Labour Code. For vehicles with an electric motor, the rate of CZK 4.80 per kilowatt-hour of electricity will be used. From 2021, the following sentence now appears in the provisions of Section 24(2)(1) to point 1 of the ITA: "The average price of electricity determined for providing travel allowances under the Labour Code may be used to determine the expenditure on fuel consumed by a vehicle which has an electric or hybrid drive combining an internal combustion engine and an electric motor."
For electric cars and hybrid vehicles, the rate of CZK 4.80 per kilowatt-hour of electricity can therefore be used to calculate travel allowances. The cost is demonstrably tax-deductible to this value under the ITA, even in the case of, for example, home charging of a car in the employee's own garage. Please note that the exact specifications of the individual types of the drive must be respected for hybrid vehicles.
Hybrid vehicles can be divided up according to the type of hybrid drive. Vehicles with an FHEV hybrid drive are characterized by automatic charging while driving, such as by regenerative braking. It is not therefore necessary to charge the battery from a socket or charger. These vehicles can travel only 1 to 3 kilometers on electric power. The advantage of these types of hybrids over conventional internal combustion engine vehicles is their lower consumption. Another type of hybrids is the so-called plug-in hybrids, which have a PHEV hybrid drive. This type of hybrid drive is also charged by braking, but it is advisable to charge a parked vehicle from a socket or charger. A vehicle of this type can travel an average of up to 50 kilometers on electric power.
When assessing travel allowances for hybrid vehicles, it is necessary to work with the vehicle technical license on which information on the type of drive used can be found. In the case of an FHEV hybrid drive, i.e. a hybrid, and not a plug-in hybrid characterized by automatic charging while driving, it is not possible to charge the battery from a socket or charger. Travel allowances will be calculated only for the internal combustion engine, i.e., a normal vehicle with a purely internal combustion engine.
