Car Handover by the Power of Attorney: Risks and Alternatives
1. The risks of vehicle handover by the power of attorney from the legal entity.
A power of attorney is a document that allows one person to appoint another person for representation to the third side.
Thus, the power of attorney does not result in a handover of the rights to the car from the company to the agent (the agent manages the car for interests representation purposes), and it raises the following consequences.
1.1. In case, a person, who drives on the basis of the power of attorney, is fined for traffic infraction and this person does not pay the fine, it will lead to problems with deregistration or registration of a motor vehicle, for instance, during the selling.
1.2. If the system of automatic fixing of traffic offenses begins to operate in full mode, the persons, who registered vehicle, will hold administrative liability. The imposing of a fine can be avoided if the person, who actually drove the car, admits the guilt, pays the fine and submits an appropriate application to the National Police. At the same time, the driver must adhere to the time limit of 14 days from the date of the decision on the administrative fine.
1.3. There is a risk that the person, who drives on the basis of the power of attorney, initiates an accident and hides from the place of the accident. Then the property claims of the victim can be directed to the vehicle owner, but not to the initiator. It also includes the risks associated with possible criminal liability in the case, when the driver hides from the accident. First, the National Police will seek the owner of the vehicle.
1.4. In case of the car handover to the person, the ordinary cost of rent of such vehicle will be acknowledged as a supplementary benefit. In case of the car handover to a legal entity or an individual, a Value Added Tax liability arises as during the distribution, as well as the necessity of the tax credit adjustment by accruing a tax liability. In addition, the right of the amortization and property costs does not arise, since the lack of income indicates non-economic exploitation. Also, there is a risk that the operation will be considered a reduction of rental income.
1.5. Private issues of automobile exploitation, servicing and the like will not be properly regulated.
2. The advantages of another way of a car handover, for example, a rent
In the context of this issue, the following variants of contracts can be considered: rent, loans, a free of charge assignment of the rights to a vehicle (as a charitable activity).
The conclusion of any of these contracts does not remove the risks specified in paragraphs 1.1 - 1.2, however, it allows to resolve the issue of obtaining compensation in the event of these risks, as well as the application to the offender of contractual sanctions, in particular penalties and fines.
2.1. Rent. The rent with an individual should be notarized and that leads to additional expenses. The legal entity requires only a simple written form. The rent contract is payable according to the definition, and the price is concluded by the parties, however, for the purposes of a reliable accounting, it should correspond to the general prices for the rent of a similar car. The agreement allows settling issues of using the property. If a rental price is consistent with regular price, the risks under paragraph 1.4 are eliminated, and this variant is the least tax-risky (arises income and tax liability for VAT, the right to amortize, and the cost of rent is not considered an additional good).
2.2. Loan. Loan is similar to the rent but, according to the definition, is free of charge. In connection with this circumstance, all the consequences of paragraph 1.4 arise. The rent with an individual should be notarized and that leads to additional expenses. The legal entity requires only a simple written form. The agreement also allows regulation of property usage issues.
2.3. A free of charge assignment of the rights to a vehicle (as a charitable activity). It is concluded in a written form and allows to regulate issues of using the property. If the vehicle is given for using to a legal entity, registered in the Non-Profit Organizations Register, and if the value of such right does not exceed 4% of the profit tax of the previous year, the financial results do not adjust to increase. At the same time, there is no right to the amortization and vehicle expenses on exploitation. In other cases, there will be consequences as in paragraph 1.4.