Let us assume your value amounts to HRK 112 500.00, 70% of which relates to tax deductible expenses and 30% to tax non-deductible expenses. Let us first define the terms “tax deductible” and “tax non-deductible expenses”. Tax deductible expenses increase a company’s expenses, while tax non-deductible expenses do increase a company’s expenses but at the same time they increase the income tax base for the same amount at the end of the year.
112 500.00 * 30% = 33 750.00 (tax non-deductible)
112 500.00 * 70% = 78 750.00 (tax deductible)
This is how the above-mentioned would look in your wallet at the end of the year:
Let us assume your income amounts to HRK 200 000.00, your expenses relating only to the car.
Total income: HRK 200 000.00
Total expenditure: HRK 112 500.00
Profit: HRK 87 500.00
Income tax: HRK 17 500.00
Profit increase for 30% of tax non-deductible car expense: HRK 33 750.00
Income tax for 30% of tax non-deductible expense: HRK 6 750.00
Here you can see how, if you purchase a car under your company’s name, you will lose HRK 6 750.00 only on lease expenses. In our example we did not take into consideration leasing company fees nor other costs of running a car. This means that you should simply add 30% of all costs related to car repairs, tires, car washing and maintenance, fuel costs and toll to the above calculation and your income tax will increase.
The conclusion would be NOT to buy a personal car in this way unless your company has a syndrome of Croatian entrepreneurship and does not run a business with profit but makes a loss big enough to “eat up” the mentioned profit increase.
Well, anyone familiar with the laws and following the reason would say: it depends on a million of factors.
But let us start from the beginning… Our whole story is about a car worth HRK 400 000.00 and your choosing between 2 options from the start: leasing or purchasing…
1. LEASING (here we will discuss operating lease only because financial lease is equal to purchasing)
Car worth: HRK 150 000.00, VAT included
Number of months of the lease: 36
Residual value: 25%
Value to be financed through leasing: HRK 112 500.00
Monthly rate: HRK 3 125.00
Purchasing value after lease: HRK 37 500.00
Here is the total calculation which shows whether all this is worth doing for you in practice.
There is no VAT any more, which means that this is the same situation as if you were to rent a car under your name as a physical entity (I use the term “rent” because operating lease is nothing but renting, i.e. a type of rent-a-car service in which you pay for the car registration, insurance, repairs etc.).
a) OPERATING LEASE WITHOUT CALCULATION OF PAYMENT IN KIND
b) OPERATING LEASE WITH CALCULATION OF PAYMENT IN KIND
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