Your Taxes: Pool cars learn to float

A thorny tax question over the years has been whether “pool cars” available for general use need to be allocated for tax purposes to particular employees.

November 18, 2014 23:01
2 minute read.

Shekel money bills. (photo credit: REUTERS)


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Israelis are very fond of their company cars, but they are less fond of being taxed on their deemed usage value.

Typically around NIS 3,000 to NIS 6,000 or more is added to taxable salary, depending on the model and year. A thorny tax question over the years has been whether “pool cars” available for general use need to be allocated for tax purposes to particular employees.

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In the Ma’aleh Adumim case last year, the courts ruled that security-patrol vehicles do not need to be allocated to particular employees.

On October 21, the Israel Tax Authority (ITA) published guidance on the use of pool cars in a letter from Miri Savyon, the senior deputy director for assessment and audit, to assessing officers.

The guidance follows an agreement reached between the ITA and research management personnel at Rafael. It seems they were sometimes allowed to take pool cars home late at night after a long day at the lab.

The guidance states that no usage benefit need be allocated to an employee who did not have use of a pool car more than once per month, worked into the night, did not have use of the car over the weekend (commencing Thursday evening) on an occasional and not systematic basis.

As for pool cars used by an employee more than once per month, the employee need only be taxed on the usage benefit attributable pro rata to the days he or she used the car (not all days in the month), provided a number of conditions are met. In particular, a pool car may be made available to an employee up to 10 days per month but no more than 100 days per year. No other car may be made available to that employee.

The vehicle should be used for ongoing activity (not defined). The vehicle may be made available to the employee for the night only and then returned the following morning. The vehicle may be made available on an occasional basis, not systematically, by whoever is responsible for this. The vehicle may be made available for working days only and not weekends (it is not clear what happens if the employee works late Thursday evening before the Israeli weekend of Friday-Saturday).

Failure to meet these conditions will make the employee taxable in full on the prescribed usage value for the vehicle.

This may be a hollow victory for the taxpayer. The poolcar expenses will be nondeductible to the employer entity and subject to 45 percent monthly tax advances.

As always, consult experienced tax advisers in each country at an early stage in specific cases.
Leon Harris is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.

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