3 ways of depreciation of a passenger car

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Nowadays, running a business without a vehicle is almost impossible. Each entrepreneur either buys it for a company, brings his private vehicle into the business or decides to lease it. Entrepreneurs who buy a vehicle for a company or enter a private asset into the Fixed Assets Register face a serious task - depreciation of a passenger car. Discover three clever ways to get you to do it in flashes!

Passenger car depreciation - how does it work?

Depreciation is a method of accounting for the value of fixed assets, including a passenger car. It consists in gradual, monthly recognition of expenses related to the purchase of fixed assets, the value of which exceeds PLN 10,000, as tax costs. The so-called depreciation write-offs, the amount of which depends primarily on the type of fixed asset.

Car depreciation - methods

A passenger car is a specific type of fixed asset that cannot be used with each of the depreciation methods. According to the regulations, a passenger car may be depreciated:

  • according to the straight-line method, where the maximum annual rate is 20%,

  • according to the individual method, with an individual rate for used cars - max. 40%

  • once - but only when the initial value of the car does not exceed PLN 10,000.

Example 1.

Mr. Wiktor runs a business and is an active VAT payer. He decided to buy a used vehicle for the company. The initial value of the car purchased by Mr. Wiktor (including all expenses incurred until the date of introducing the vehicle to the company) amounted to PLN 11,500 net. The taxpayer has the right to deduct 100% VAT on the purchase of the car and costs related to its use.What method of passenger car depreciation can Mr. Wiktor use? Is it possible to apply a one-off depreciation?

No, a taxpayer cannot use a one-off depreciation of assets up to PLN 10,000, due to the fact that the initial value exceeds the limit for one-off depreciation. The taxpayer may apply linear or individual depreciation.

Passenger car depreciation - limits

Entrepreneurs using company passenger cars in their activities should remember about important restrictions in including the related expenses as costs. Pursuant to the Act on personal tax, in the case of passenger cars, depreciation write-offs for wear and tear of a passenger car are not considered a tax cost, in the part determined on the value of the car exceeding the equivalent of:

  • PLN 225,000 - for electric cars
  • PLN 150,000 - for other passenger cars.

Art. 23 sec. 1 point 4 lit. a of the Personal Income Tax Act
'They are not considered tax deductible costs [...]write-offs for wear and tear of the passenger car, made in accordance with the principles set out in art. 22a-22o, in part determined from the value of the car in excess of the amount:
a) PLN 225,000 - in the case of a passenger car which is an electric vehicle within the meaning of art. 2 point 12 of the Act of 11 January 2018 on electromobility and alternative fuels (Journal of Laws of 2019, item 1124),
b) PLN 150,000 - in the case of other passenger cars ".

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Example 2.

The taxpayer purchased an electric vehicle, the initial value of which is PLN 250,000. The component meets the definition of a fixed asset and is to be included on June 11, 2020 in the Fixed Assets Register. From what value can depreciation write-offs be made?

In such a case, the depreciation write-offs will amount to a maximum cost of PLN 225,000. However, PLN 25,000 will not be included in the costs.

Amortization of a passenger car in the wfirma.pl system

In order to make monthly depreciation, wfirma.pl users should enter the vehicle into the fixed assets register:

- on the basis of a purchase invoice or a purchase-sale agreement in the EXPENSES »ACCOUNTING» ADD VAT INVOICE / INVOICE (without) VAT tab,

- on the basis of the transfer protocol from private property directly to the fixed assets register in the tab RECORDS »FIXED ASSETS» ADD FIXED ASSET.

After entering the basic data, method and rate of depreciation, the value of the car will be included in costs in the form of monthly depreciation write-offs.