Changing to winter tires - can it be a tax deductible cost?
The car is an inseparable element used in most enterprises. It is connected with many expenses that must be incurred in connection with its operation. One such expense is tire change due to the changing seasons. Can the expenses related to the replacement of tires be classified as tax deductible costs? Check!
Does changing tires improve the vehicle?
Entrepreneurs often wonder whether the purchase of new winter tires will be considered an improvement to the car. In this case, it is worth paying attention to the definition of improvement in the context of fixed assets.
Pursuant to Art. 22 g of paragraph 1. 17 of the PIT Act, fixed assets are considered improved when the sum of expenses incurred for their reconstruction, expansion, reconstruction, adaptation or modernization in a given tax year exceeds PLN 10,000 (net for active VAT payers; gross for taxpayers exempt from VAT) and these expenses increase the value in use in relation to the value on the day of taking the fixed assets into use.
The purchase and change of winter tires in the car used by the company do not meet the above definition - such activities are carried out to increase the safety of driving the vehicle and protect it against the negative effects of weather conditions. Consequently, winter tires are not an asset improvement and represent an ordinary tax deductible cost related to the day-to-day use of the vehicle.
Can tire change be recognized as an expense in KPIR?
In order for an expense to be included in operating costs, it must meet certain conditions:
- it must be incurred in order to obtain, maintain or secure a source of income;
- must be related to a business,
- cannot be listed in Art. 23 of the PIT Act,
- must be properly documented.
If the expenses related to the replacement of tires meet the above conditions, they can be included in business expenses. However, the way they are entered in the records will differ depending on whether the vehicle is entered into fixed assets or is a private vehicle used in the business.
Tire change and vehicle entered into fixed assets
If the change of tires occurs in a vehicle included in the fixed assets register, the entrepreneur has the right to include in company costs:
- 75% of the net value plus non-deducted VAT (for active VAT payers) or 75% of the gross value (for non-VAT payers) - if the vehicle is used privately and for business purposes;
- the full value of the expenditure (net for active VAT payers; gross for VAT-exempt taxpayers) - if the vehicle is used only for business purposes.
Then, this purchase will be included in the KPIR in column 13 - other expenses and in the VAT register of purchases in accordance with the right to deduct VAT (100% or 50%) in the case of active VAT payers.
Tire change and a private vehicle used in business
Expenses incurred in connection with the use of a private passenger vehicle in business activities are recognized in tax deductible costs in the amount corresponding to 20% of the sum of expenses incurred on this vehicle (for active VAT payers this value is understood as the net amount increased by non-deductible VAT, and in the case of taxpayers exempt from VAT, it is a gross amount). From January 1, 2019, the method of settling operating expenses related to a passenger car used in business activities has changed, which is detailed in the article: Vehicle operating expenses in 2019 - tax cost and VAT deduction.
How to calculate VAT when buying tires?
When deducting VAT on expenses related to changing tires, it does not matter whether the vehicle is entered into the fixed assets or not. In such a situation, it is important what amount of VAT deduction on expenses related to a given vehicle was chosen by the entrepreneur (50% or 100%), because then he makes a deduction according to the selected amount.
As for taxpayers exempt from VAT, due to the fact that they cannot deduct VAT from the expenses incurred, the expenditure will be included in the operating costs in the gross amount.
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Mr. Adam purchased the service of changing tires for a car for PLN 1,230 gross (including PLN 230 VAT). The car is included in the register of fixed assets and Mr. Adam deducts 50% of VAT from the related expenses. How should such a purchase of a tire change service be included in the records?
If Mr. Adam deducts 50% of VAT from the expenses related to the vehicle, then such an operation should be included in:
- KPIR in column 13 in the amount of 75% x (net (PLN 1000) + 50% VAT (PLN 115)), i.e. PLN 836.25;
- in the VAT register in the amount of 50% of VAT, i.e. PLN 115.
Ms Anna has a car in fixed assets, from which she is entitled to a 100% deduction of VAT. In December, it purchased the service of changing tires to winter ones for PLN 369 gross (including PLN 69 VAT). How can such a purchase be accounted for?
When buying a tire change, Ms Anna has the right to include such an expense in:
- KPIR in column 13 in the amount of 100% of the net value, i.e. PLN 300;
- in the VAT register in the amount of 100% VAT, i.e. PLN 69.
Mr. Zbigniew is a non-rescuer and has purchased a tire replacement service for a car that is his fixed asset used only in business. The invoice showed the following values:
- the net amount of PLN 350
- VAT 80.50 PLN,
- gross value PLN 430.50.
So how should he include such an invoice? Mr. Zbigniew should include such an invoice in full, ie in the gross amount of PLN 430.50, in column 13 of the KPiR.
How to settle the purchase of a tire replacement service from an EU contractor?
The purchase of a tire replacement service from an EU contractor will vary depending on the nature of the transaction.
If the purchase concerned the tire change service itself, then such a transaction should be accounted for in accordance with Art. 28b of the VAT Act, i.e. as an import of services. However, for such a transaction to take place, certain conditions must be met:
- the service provider has no seat or permanent establishment in the territory of the country and has no permanent place of residence or residence in the territory of the country;
- the service recipient and service provider is an active VAT payer registered to EU VAT.
However, if the entrepreneur purchased tires and a given purchase was accompanied by a service of their replacement, such a transaction should be characterized as an intra-Community acquisition of goods (WNT). The condition is, however, that the purchase of tires is the dominant service. Pursuant to Art. 9 sec. 1 and 2 of the VAT Act, in order for the transaction to be treated as intra-Community acquisition of goods, the following conditions must be met:
- the buyer of the goods is a taxpayer of Polish VAT or a taxpayer of value added tax, and the purchased goods are to serve the taxpayer's business activity, or a non-taxable legal person (subject to Article 10);
- the person delivering the goods is a VAT or value added tax payer;
- the goods have been confirmed to have been exported to a Member State other than the territory of the Member State where dispatch or transport began by the person delivering the goods, the purchaser of the goods, or on their behalf.
If the value of the intra-Community acquisition of goods (intra-community acquisition of goods) at a taxpayer benefiting from the VAT exemption does not exceed PLN 50,000 in a given year, he does not have to register for intra-community transactions (VAT-EU), and thus is not required to report intra-community goods . In summary, tire change can be classified as an operating tax expense if it meets certain requirements for recognizing expenses as operating expenses.
Tire change - recognition of the expenditure in the wFirma.pl system
In order to post a national invoice in the wfirma.pl system related to the change of tires, go to the EXPENSES »ACCOUNTING» ADD »VAT INVOICE tab. In the window, as the type of expenditure, select OTHER EXPENDITURE RELATED TO THE CURRENT USE OF THE VEHICLE, and in the description item, you can enter information, eg "tire change". After saving, the expense will be included in the KPIR in column 13 - other expenses in accordance with the right to include the expense in costs and in the VAT register in accordance with the right to deduct VAT on expenses related to a given vehicle.