Car Rental Expense Restriction

What is Expense Restriction?

Expense restriction means that the amounts spent for your business are calculated from the amount included in the profit share, regardless of commission, interest, maturity and exchange rate, and not invoiced as an expense. Many different lines of business are included in the expense restriction. The purpose of the implementation of the expense restriction was published in the Official Gazette as the regulation of the tax exemption rate.

What is Car Rental Expense Restriction?

Car rental expense restriction is a price limit application to bill your rental car as an expense. The price limit increases every year according to the current tax rate.

The car rental expense restriction for 2023 allows billing as an expense of 8.000 Turkish Liras of the monthly rental price. A maximum of 200,000 Turkish Liras, including Special Consumption Tax (SCT) and Value Added Tax (VAT), can be shown as expense.

Is Expense Restriction Applied on Rental Vehicles?

Car rental expense restriction concerns corporate companies and individuals who want to rent a car. You can benefit from expense invoicing for all rental services with a fee of 8.000 Turkish Liras, such as long-term rental vehicles and fleet rental services. You can deduct the VAT and SCT amount of the car rental amount from your annual tax amount. Transactions and amounts during this process may vary from year to year.

Who Cannot Benefit from the Car Rental Expense Restriction?

Anyone who is not a taxpayer cannot benefit from the car rental expense restriction. This expense restriction is limited according to the rental fee given by the car rental agency or person. You should read the current guidelines of the relevant law published in the official gazette in order to show your car rentals as an expense, invoice, and reduce your tax base. (Directive on Limitation of Expenditures - Official Gazette of the Republic of Turkey)

What are the Car Rental Expense Restriction 2022 Guidelines?

The car rental expense restriction changed in 2022 with the change in amount. The amount of the monthly rental fee corresponding to 7.000 Turkish Liras is included in the car rental expense restriction. This amount is valid for passenger cars. For the amount changes in rental vehicle models such as motorcycles and minibuses, it can reach 10.000 Turkish Liras by calculating the age of the vehicle, insurance costs, insurance costs, including VAT and SCT.

What are the Car Rental Expense Restriction 2023 Guidelines?

The car rental expense restriction has not changed in its guidelines in 2023. The amount shown as the expense restriction was increased and the car rental expense restriction was deemed appropriate as 10,000 Turkish Liras according to the monthly car rental amount.

How is Car Rental Expense Restriction Calculated?

In order to calculate the car rental expense restriction;

Rental Car Daily Fee
VAT/SCT Amount
Vehicle Expense Limit
Limit on Amount Subject to Discount as Depreciation (TL)- (Excluding VAT & SCT)
Some Limit of Depreciation in Cases where Taxes are Added to the Cost Value or the Passenger Car is Acquired as Second Hand

It is divided into 5 items and calculations are made based on the annual current tax rates.

How is the Monthly Car Rental Expense Restriction Calculated?

In order to make a monthly car rental expense restriction, the daily fee of the vehicle to be rented must be paid in Turkish Lira.

Example;

You have rented a car for 1 month from WorldCarRental on behalf of your company. Your monthly VAT excluding payment amount will be 10.000 Turkish Liras. The VAT amount of this car rental fee is 18%, ie 1.800 Turkish Liras. The tax rates given for the year 2023 are as follows;

Amount that can be written off: 8.000 Turkish Lira
Amount of VAT that can be discounted: (8,000*0.18): 1440 Turkish Lira
KAGK Amount to be Written: 2.000 Turkish Liras
Amount That Cannot Be Discounted: 360 Turkish Lira

On the other hand, in accordance with Article 30/d of the VAT Law, the total expense invoicing should be limited to 8,500 Turkish Liras, since the VAT paid cannot be deducted from the calculated VAT due to the expenses that are not considered to be deductible in the determination of income in terms of income and corporate tax.