Deciding to purchase a truck is a significant step for many individuals and businesses, especially with the transportation industry’s ongoing growth. However, the question arises: should you register a truck under a company name? This is a complex issue that requires careful consideration of both benefits and risks. This article, compiled by the experts at Xe Tải Mỹ Đình, will analyze the legal, financial, and operational aspects in detail to help you make the most informed decision.
Benefits of Company Truck Ownership
Registering a truck under a company name offers several notable advantages, particularly in terms of finance and management. Here are the main benefits:
1. VAT Deduction
One of the most significant benefits is the ability to deduct input Value Added Tax (VAT). When a company purchases a truck, this VAT amount can be deducted, substantially reducing the initial investment cost.
For example, if a truck costs VND 1 billion and the VAT is 10%, the company can save VND 100 million thanks to VAT deduction. This amount can be reinvested into other business operations.
VAT invoice deduction example when purchasing a company truck, reducing initial investment costs.
2. Fixed Asset Depreciation
Trucks are considered fixed assets of the company and are allowed to be depreciated according to legal regulations. This depreciation cost is included in business expenses, thereby reducing taxable income for corporate income tax.
For example, if a truck is depreciated over 5 years, the company can deduct a portion of the truck’s value from its profit each year, reducing the amount of tax payable. This helps businesses optimize cash flow and reduce tax burdens.
3. Maintenance and Repair Costs
All costs related to maintenance and repair of company-owned trucks can be included in business operating expenses. This helps reduce taxable profit and ensures the truck is always in optimal operating condition.
For example, annual routine maintenance costs of around VND 30 million for a truck can be accounted for as business expenses, easing financial burdens and ensuring operational safety.
4. Fuel and Operating Costs
Similar to maintenance costs, fuel (gasoline/diesel) costs, toll fees, parking fees, and other operating costs related to the truck’s transportation business activities are also considered legitimate business expenses.
For example, monthly fuel costs for a truck fleet are a significant expense, but when the trucks are company-owned, this expense is accounted for, helping businesses reduce taxes and manage costs more effectively.
5. Enhancing Company Image and Reputation
Trucks bearing the company’s brand and logo contribute to enhancing the professional image and reputation of the business in the eyes of partners and customers. This is particularly important in the transportation industry, where reliability and professionalism are key factors.
For example, a fleet of new, clean, and well-maintained trucks bearing the company logo will create a strong impression on customers, demonstrating the professionalism and scale of the transportation business.
6. Transparent Asset and Expense Management
Owning trucks under a company name makes asset and expense management more transparent and easier. All expenses related to the truck are clearly recorded in the company’s accounting books.
For example, using asset management software helps track detailed maintenance history, fuel costs, depreciation, and other expenses for each truck, enabling efficient fleet management and informed business decisions.
7. Personal Asset Protection
In the event of legal or financial risks to the company, company truck ownership helps protect the personal assets of the owner. The truck is a company asset, separate from the personal assets of the business owner.
For example, if the company faces debt or bankruptcy issues, creditors will only have the right to claim company assets, without affecting the personal assets of the business owner.
Risks and Disadvantages to Consider
Besides the benefits, owning a truck under a company name also carries some risks and disadvantages that you need to consider carefully:
1. Strict Legal Compliance
The use of company trucks must strictly comply with legal regulations related to businesses and transportation. Using the truck for improper purposes or without valid documentation can lead to risks of inspection and penalties from tax authorities and other functional agencies.
For example, using a company truck for personal purposes without reasonable justification may be considered tax evasion and penalized according to the law.
2. Higher Insurance Costs
Truck insurance premiums for company-owned vehicles are often higher than for personal vehicles. Insurance companies often assess higher risks for commercial vehicles due to higher usage frequency and potential for incidents.
For example, annual insurance premiums for a company truck can be 20-30% higher than for a personal truck of the same value, increasing operating costs.
3. Limits on Asset Depreciation
The law stipulates maximum depreciation rates for automobiles, including trucks. If the truck’s value exceeds the regulated limit, the excess portion will not be included in depreciation expenses, reducing tax benefits.
For example, if you purchase an overly expensive truck, the value exceeding the regulated depreciation limit will not be counted as an expense, reducing the economic efficiency of depreciation.
4. Complex Transfer Procedures
Selling or transferring ownership of company-owned trucks can be more complex than for personal vehicles. It requires carrying out legal procedures related to the business, including resolutions from the members’ council/board of directors, procedures for transferring company assets, and other administrative procedures.
For example, when wanting to sell an old truck, the company must carry out asset liquidation procedures, issue invoices, and other legal procedures related to transferring ownership of business assets.
Illustration of truck registration procedures, a process that can be more complex when the truck is company-owned.
5. Truck Belongs to the Company, Not Individual
A company-owned truck is an asset of the company, not the personal property of the business owner. This means that decision-making rights regarding the truck belong to the company, and in some cases, personal use of the truck may be restricted or require company approval.
For example, the business owner cannot freely decide to sell a company truck without going through company procedures and approvals.
6. Business Management and Operating Costs
Establishing and maintaining a company entails additional business management and operating costs, including accounting, tax, legal, and other administrative expenses. If you are only purchasing a single truck, these costs may reduce overall financial benefits.
For example, hiring accounting services, paying business license tax, and other legal compliance costs can incur additional annual expenses for the business.
7. Risk of Tax Audits
Due to the tax benefits that company truck ownership offers, businesses may face a higher risk of thorough inspection by tax authorities. Businesses need to ensure that all activities related to the truck are properly recorded and accounted for, with complete valid documentation to prove the legality of expenses.
For example, tax authorities may meticulously audit fuel, maintenance, and truck depreciation expenses to ensure they are used for legitimate business purposes and comply with legal regulations.
8. Restrictions on Personal Use of the Truck
Although not completely prohibited, personal use of company trucks should be limited and requires company approval. Improper use of the truck can cause legal and tax issues.
For example, frequent personal use of a company truck, unrelated to work, may be reviewed by tax authorities and require explanation.
Conclusion
The decision of whether to register a truck under a company name depends on many factors, including the scale of transportation operations, financial situation, management capabilities, and your risk tolerance.
If you are:
- A large transportation business or planning to develop a fleet: Establishing a company and registering trucks under the company name is a reasonable choice, offering numerous benefits in terms of taxes, management, and company image.
- An individual or small household business, just starting out: Carefully consider the trade-offs between tax benefits and the costs and risks of establishing a company. Consult with tax and legal advisors to make the most appropriate decision.
Xe Tải Mỹ Đình hopes this article has provided you with a comprehensive and detailed overview of the question “should you register a truck under a company name?”. For more in-depth advice and to choose the truck that best suits your business needs, contact us today!
