Tax relief on car depreciation for business owners

For any company, a service vehicle is an important working tool. It helps with logistics, sales, and ensures employee mobility. However, in addition to the benefits, the vehicle is an asset that loses its value over time. This process is called depreciation. The Tax Code of the Russian Federation allows businesses to use this natural process to their advantage. Properly structured amortization of automobiles becomes a legal and effective tool for reducing the tax burden. Understanding the rules for its calculation and existing benefits is the key to optimizing expenses and increasing the financial efficiency of the company. In this article, we will detail how businesses can save on taxes using depreciation.

What is depreciation and why is it beneficial for business?

Simply put, amortization is the gradual transfer of the cost of an asset (in our case, a car) to the company's expenses over its entire useful life.

What is the benefit? It's very simple. Monthly depreciation deductions are included in the company's expenses. As a result, this reduces the tax base for profit tax. Thus, the higher the amount of depreciation, the less profit tax the company will pay. This is an absolutely legal tax optimization method used by all civilized businesses.

Definition of depreciation group and useful life (UL)

To begin depreciating, first of all, you need to determine which depreciation group your car belongs to. This will determine the period during which its value will be written off as expenses.

• Classification: According to the Decree of the Government of the Russian Federation, all fixed assets are divided into 10 depreciation groups. Passenger cars most often fall into third or piyatuyu group.
• Third group: This includes most passenger cars (with an engine displacement of up to 3.5 l). The service life (SL) for this group is from 3 to 5 years (that is, from 37 to 60 months).
• Fifth group: This includes luxury cars (with an engine displacement of more than 3.5 liters). Their SPI is from 7 to 10 years (from 85 to 120 months).

The company is entitled to independently set a specific SPI within the limits set for the group. For example, for a machine from the third group, a term of 40 or 50 months can be set.

Methods of Depreciation Calculation in Tax Accounting

The Tax Code of the Russian Federation offers two main calculation methods. The choice of method must be fixed in the organization's accounting policy.

Linear method

This is the simplest and most common method. When it is used, the cost of the car is written off as expenses evenly over its entire useful life.

• Calculation formula: Monthly amortization amount = Initial cost / Useful life (in months).
• Example: The company purchased a car for 2,000,000 rubles and established an Amortization Period (API) of 40 months. Consequently, 50,000 rubles will be written off monthly for expenses (2,000,000 / 40).

Nonlinear method

This method allows for writing off most of the cost in the first years of operation. The calculation here is more complex and applies to the entire depreciation group as a whole, rather than to a separate asset. Due to its complexity, it is used less often, especially in companies with a small fleet.

Main tax benefit: depreciation premium

This is one of the most powerful tools for quickly optimizing taxes. Depreciation premium is a company's right to deduct a portion of the cost of a new car as expenses in the same period it was put into operation.

• Bonus amount: For vehicles from the third-seventh depreciation groups (where most passenger cars fall) it is possible to write off a single time. do 30% from the original cost.
• How does this work in practice: Let's say a company bought a car for 3,000,000 rubles, which belongs to the third group. It can apply a depreciation premium of 30%, which amounts to 900,000 rubles. This amount can be immediately included in expenses and reduce income tax. The remaining value (2,100,000 rubles) will be written off through monthly depreciation within the established SPI. Proper use of this benefit is an important part amortization of automobiles.

Leasing and Subscription: Alternative Ways of Tax Optimization

Purchase of a vehicle and its subsequent amortization — this is a classic, but not the only path. Modern business increasingly chooses more flexible models.

Leasing

When leasing, the car is not owned by the company, but is taken on a long-term lease with subsequent repurchase (or without it). From a tax perspective, this is very beneficial. All lease payments are fully charged to expenses, reducing the tax base. In addition, VAT on lease payments can be deducted.

Subscription (for example, from GetCar)

This is the simplest and most modern way to use corporate transportation. A subscription completely frees up accounting from all the complexities associated with amortization of automobiles.

• No assets on balance: The machine is not company property, so it doesn't need to be recorded on the balance sheet and depreciation calculated.
• Simple operating expenses: The monthly subscription payment is a standard operating expense (OPEX). It fully and without complexity reduces the taxable base.
• All inclusive: The payment already includes transport tax, insurance, inspections, and repairs. Accounting departments do not need to process many invoices from different suppliers.

Thus, the subscription offers maximum financial transparency and ease of accounting, allowing you to focus entirely on your core business.

In conclusion, Amortization of service vehicles is a powerful legal tool for reducing tax burden. Understanding how to properly determine the depreciation group, choose the accrual method, and apply the depreciation premium can achieve significant savings. However, for many modern companies that value simplicity and predictability, alternative models such as leasing or subscription become more attractive, which removes all questions regarding accounting and depreciation, transforming the costs of the vehicle fleet into a clear and manageable operating expense.