Company passenger car depreciation

Service-Tax

In order to make depreciation write-offs of a passenger car, it is necessary to include it in the company's fixed assets register. When choosing the appropriate depreciation method, it is important whether the passenger car is new, used or used in difficult conditions - these factors determine which method will be applicable. Find out what is the depreciation of a passenger car!

Amortization of a passenger car using the straight-line method

Straight line depreciation is the standard method for passenger cars purchased for a company. In accordance with the assumptions of this method, the fixed asset is evenly worn throughout its useful life. When using it, we start depreciation from the first month following the month in which the car was entered into the fixed assets register. The list of depreciation rates shows that for passenger cars classified under the number KŚT 741 the basic annual depreciation rate is 20%, which means that the car will be depreciated for 5 years.

Example 1.

In June, the XYZ company commissioned a passenger car worth PLN 25,000. When will it be possible to start depreciation and include them in the KPiR to reduce income?

Due to the fact that depreciation begins in the month following the month of introducing the fixed asset to the company, the first depreciation write-off by the XYZ company will be made in July in the amount of PLN 416.67, i.e. (25,000 x 20%) / 12 months.

Depreciation of a passenger car using the accelerated linear method

Increasing the depreciation rate consists in multiplying the depreciation rate given in the List of Depreciation Rates by the factor adopted by the taxpayer, not higher than the maximum. In this way, you can speed up the settlement time in the cost of a passenger car.

For a passenger car, the basic rate is 20%, while the maximum value of the coefficient is 1.4. Thus, the highest depreciation rate may be 28%, then the depreciation period will be 3 years and 7 months.

The accelerated linear depreciation can be applied to passenger cars only if the statutory conditions apply. The base rate may be increased when the car is used:

  • in conditions requiring particular technical efficiency, or

  • more intensively compared to average conditions.

From the explanations to the List of annual depreciation rates, we can learn that means of transport requiring particular technical efficiency are understood as those objects that are used in three-shift operation, although they do not operate in continuous motion, used in field conditions, in forest, underground or other conditions indicating more intensive use.

However, the regulations do not define what it means to use a car more intensively than in average conditions. Therefore, the entrepreneur must make such an assessment on his own, which may turn out to be a problem in practice.

If the above-mentioned circumstances occur, the increased depreciation rate may be applied from the month following the month in which the circumstances justifying these changes occurred. However, it should be remembered that when the conditions justifying the increase in the rate change, it must be reduced from the next month.

Example 2.

In June, the company commissioned a passenger car worth PLN 25,000. This car will be used due to the type of activity in difficult off-road conditions.

The monthly value of the depreciation write-off will be PLN 583.33, i.e.(25,000 x 20% x 1.4) / 12 months.

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Passenger car depreciation - individual method

Another method that we can use for depreciation of a passenger car is the individual method, according to which we can individually set depreciation rates for used or improved fixed assets that were entered into our fixed assets register for the first time.

As defined in Art. 22j paragraph. 2 points 1 and 2 of the PIT Act, fixed assets are considered as:

  • used - if the taxpayer proves that before their acquisition they were used for at least 6 months by an entity other than the taxpayer,

  • improved - if, before being entered into the records, the expenses incurred by the taxpayer for their improvement constituted at least 20% of the initial value.

In the case of passenger cars, it should be remembered that the depreciation period cannot be shorter than 30 months, then if the passenger car meets the definition of a used or improved car, the depreciation period can be shortened to 2.5 years. This means that the individual annual depreciation rate for a passenger car cannot exceed 40%. This is the maximum amount of this rate. If they wish, taxpayers can also set it at a lower level.

Example 3.

In June, the company purchased a used car worth PLN 25,000.

The monthly value of the depreciation write-off will be: PLN 833.33, i.e.(25,000 x 40%) / 12 months.

One-time depreciation of a passenger car

According to the regulations, one-off depreciation may be used for fixed assets included in group 3-8, with the exception of passenger cars. This does not mean, however, that it is not possible to apply a one-off write-off at all. Because if the initial value of a passenger car does not exceed PLN 10,000 (net for active VAT payers, gross for VAT-exempt taxpayers), the taxpayer has the right to apply a one-off depreciation under Art. 22f paragraph. 3 of the PIT Act. Therefore, assets with an initial value not exceeding PLN 10,000 can be entered directly into costs or depreciated on a one-off basis. A one-off write-off of such a fixed asset may in this case be made in the month of putting the car into service or in the following month.

Limits for passenger car depreciation

In the case of passenger cars, until December 31, 2018, there was a restriction in recognizing depreciation charges in tax costs. The tax cost was not the depreciation write-offs for the passenger car in the part determined on its value, exceeding the equivalent of EUR 20,000, converted into zlotys at the average exchange rate of the National Bank of Poland on the day the car was put into use.

In view of the above, the exercise of the right to deduct the expenses incurred for the purchase of a passenger car as tax costs was dependent on determining what part of each depreciation relates to the initial value of the car, not exceeding the equivalent of EUR 20,000. The remaining part of the write-off cannot be treated as a tax deductible cost.

From 01/01/2019, the depreciation limit for the purchase of passenger vehicles has been significantly increased. However, the legislator made the amount of the limit dependent on the type of vehicle owned. For internal combustion cars, it will be a value of PLN 150,000. PLN, and for electric - PLN 225 thousand.

Amortization of a passenger car in the wfirma.pl system

After the passenger car is entered into the fixed assets register, the wfirma.pl system automatically includes depreciation write-offs in the column 13 of the KPiR - Other expenses as of the last day of the month to which they relate. In the tab RECORDS »FIXED ASSETS, you can find all the most important information about assets introduced to business activity, which have been added to the fixed assets register. After clicking on the name of the entered fixed asset, the view of its details will appear in which depreciation write-offs for a given year will be visible.

As a result of the suspension of business activity, the entrepreneur should also suspend the depreciation of fixed assets. To do this, go to the CUSHION SUSPENSION sub-tab and select the Add amortization suspension option.

From the fixed asset details window it is also possible to print the depreciation plan by selecting the PRINT »PRINT DEPARTMENT PLAN from the top menu.