Car Loan Agreement: When Is Certified Translation Needed?

A car loan agreement is a popular form of making a vehicle available to another person or company without charging fees. Although often concluded verbally, in many situations, especially when the car is to be used abroad or for business purposes, preparing a written agreement and its potential certified translation may prove necessary. In this article, we'll take a closer look at what a loan agreement is, what elements it should contain, and when it's worth considering its professional translation.

What is a car loan agreement?

A loan agreement, regulated in the Civil Code, is a contract by which one party (the lender) allows another party (the borrower) to use a thing given to them for this purpose free of charge for a specified or unspecified period. The key feature of a loan agreement is its gratuitous nature – the borrower does not pay the lender for the possibility of using the thing. The subject of a loan can be both movable property (e.g., car, electronic equipment) and real estate (e.g., apartment, garage). However, money cannot be loaned – in such a case, we are dealing with a loan contract.

A car loan agreement is therefore a formal arrangement under which the vehicle owner (lender) allows another person or entity (borrower) to use this car free of charge. Although the law allows such an agreement to be concluded verbally, for evidentiary purposes and to avoid misunderstandings, especially in the context of using the vehicle in a company or abroad, written form is recommended.

When is a car loan agreement prepared?

A vehicle loan agreement is often prepared in the following situations:

• Using a private car in a company: When the owner (e.g., an entrepreneur running a sole proprietorship or a company partner) makes their private car available for business purposes.
• Making a company car available to an employee: Sometimes companies decide on this form instead of, for example, settling a flat rate for using a private car by an employee.
• Lending a car to a family member or friend: For example, for the duration of a trip, breakdown of their own vehicle, etc.
• Lending a truck or specialized vehicle: A written agreement can be useful during road inspections or in the case of international transport.

Having a written loan agreement facilitates the settlement of operating costs, determination of liability for damages, and confirmation of the right to use the vehicle to third parties (e.g., police, insurer).

What elements should a vehicle loan agreement contain?

Although the Civil Code does not impose a rigid template for a loan agreement, a good agreement should precisely define the rights and obligations of the parties. Key elements worth including are:

• Identification of the parties to the agreement: Exact details of the lender (vehicle owner) and the borrower (user).
• Date and place of concluding the agreement.
• Exact description of the subject of the loan: Make, model, registration number, VIN number of the car.
• Determination of the technical condition of the vehicle at the time of handover.
• Duration of the agreement: Whether it's for a specified period (e.g., 1 year) or unspecified.
• Conditions for using the vehicle: For example, whether the borrower can make the car available to third parties, whether they can travel abroad with it.
• Rules for bearing operating costs: Who covers fuel costs, inspections, minor repairs, insurance (although mandatory liability insurance costs usually burden the owner).
• Liability for damages: Who is responsible for vehicle damage occurring during use.
• Conditions for returning the vehicle.
• Signatures of both parties.

Does a car loan agreement need to be registered anywhere?

The car loan agreement itself, as a gratuitous transaction, is not subject to civil law transaction tax (PCC) and as a rule does not need to be reported to the tax office. The Civil Law Transaction Tax Act does not list the loan agreement among contracts subject to this tax.

However, the issue of income tax looks different, as discussed below.

Car loan agreement and tax issues

Despite the fact that a loan agreement is gratuitous, it may have certain consequences in income tax for the borrower. Using someone else's property for free is treated as income from gratuitous benefits. The value of this income is determined based on market prices for renting a similar vehicle.

Income tax exemption from gratuitous benefits applies when the loan occurs between persons classified in tax groups I and II within the meaning of inheritance and gift tax provisions (i.e., immediate family, e.g., spouse, descendants, ascendants, stepchild, siblings, stepfather, stepmother, in-laws, son-in-law, daughter-in-law).

For the lender, giving a car for free use may mean the inability to make depreciation deductions from this item during the loan period, if the car is a fixed asset in the company.

When is certified translation of a car loan agreement needed?

Certified translation of a car loan agreement may be needed in several situations, especially when the vehicle is to be used outside Poland or when one of the parties to the agreement is a foreign entity:

• Traveling abroad with a loaned car: In case of road inspection in another country, a translated loan agreement may be required by local services to confirm the right to use the vehicle, especially if the driver is not its owner listed in the registration certificate.
• Lending a car to a foreign company or from a foreign company: For formal, accounting, or legal purposes in both countries.
• Presenting the agreement to foreign offices or institutions: For example, in insurance, customs, or accident matters.
• When one of the parties to the agreement does not speak the language in which the original was prepared: Translation ensures full understanding of the agreement terms.

Similar to the case of power of attorney or purchase-sale agreement, for the translation to have official force, it must be performed by a sworn translator of the given language, e.g., English or German.

How to professionally translate a loan agreement online?

If you need reliable certified translation of a car loan agreement, the Sworny.com platform offers quick and convenient access to professional sworn translator services.

1. Prepare a scan or clear photo of your loan agreement.
2. Submit the file through the secure form at Sworny.com, specifying the translation language.
3. You'll receive offers from sworn translators along with quotes.
4. Choose the best offer, make online payment, and the translator will begin work.
5. You'll receive the completed, authenticated translation in electronic form (scan) and, upon request, the original will be sent by mail or courier.

With Sworny.com, you gain confidence that your loan agreement translation will be performed professionally, on time, and with confidentiality maintained.