How to tax the sale of a passenger car from April 1, 2014?
April 1, 2014 was extremely important for all VAT taxpayers, as it introduces a number of changes in the field of deducting vehicle tax, including tax on passenger cars. As you know, these are not the first VAT modifications this year, so taxpayers must put a lot of effort into understanding them. The changes will concern, among others issues related to the settlement of the sale of a passenger car.
Sales of passenger cars until December 31, 2013.
Some taxpayers could take advantage of the VAT exemption for the sale of passenger cars until the end of December 2013. This right was granted by two legal acts - the VAT Act and the Ordinance of the Minister of Finance on the implementation of certain provisions of the VAT Act. Each of them raised slightly different issues.
The regulations contained directly in the VAT Act (Article 43 (1) (2)) indicated that the VAT exemption could apply to the supply of second-hand goods (i.e. those whose use time in the company was at least half a year), if the seller was not entitled to deduct input VAT.
On the other hand, par. 13 sec. 1 point 5 of the regulation gave the right to an exemption for the supply of passenger cars and other motor vehicles, for the purchase of which the taxpayer had the right to deduct 50% or 60% of the tax amount - but not more than PLN 5,000 or PLN 6,000, respectively. However, apart from the partial tax deduction, the car had to meet the definition of a second-hand product - its useful life could not be less than six months from the date of acquiring the right to dispose of it as an owner.
Sales of passenger cars from January to March 2014
In the period from January to March 2014, two legal acts were also applicable to the exemption - the amended VAT Act and the regulation on VAT exemptions.
As indicated by Art. 43 sec. 1 point 2 of the Act, exemption from VAT when selling a vehicle is possible only if the taxpayer has met two conditions:
- the vehicle was only used for tax-exempt activities;
- on account of its purchase, import or manufacture, the taxpayer was not entitled to reduce the amount of tax due by the amount of input tax.
Importantly, the taxpayer had to meet both of these conditions (simultaneously) to benefit from the exemption. In practice, this privilege was only available to taxpayers who benefited from VAT exemption.
However, as it resulted from par. 3 sec. 1 point 20 of the Regulation on VAT exemptions of 20 December 2013, the sale of passenger cars is exempt, for the purchase of which the taxpayer was entitled to a partial tax deduction of 50% or 60%, but not more than PLN 5,000 or 6,000. As until the end of 2013, it should be noted that from January 2014 the definition of used goods no longer applies - i.e. the condition of using a car for at least six months does not affect the obligation to tax the sale of a passenger car.
Sale of a passenger car after April 1, 2014
The right to VAT exemption for the sale of passenger cars by an entity that had the right to a partial tax deduction from April 1, 2014, loses its effect. Because par. 3 sec. 1 point 20 of the Exemption Regulation has been repealed.
In connection with the above, the sale of a passenger car, on the purchase of which the buyer was entitled to a partial deduction of input VAT, should be taxed at the basic rate of 23% VAT.
Importantly, Art. 43 sec. 1 point of the VAT Act, which has been in force since January 2014 and gives the right to exemption when the car was used only in activities exempt from VAT and no tax was deducted upon its purchase.
When selling a passenger car, one should remember about the issue of adjusting the input VAT when the sale takes place within 60 months of the purchase (or 12 months if the value of the car does not exceed PLN 15,000). Until the end of March 2014, when a taxpayer benefits from VAT exemption when selling a vehicle (a car for which he was entitled to a partial tax deduction of 60%, not more than PLN 6,000), it is necessary to make a mandatory negative correction. However, after the entry into force of the new provisions of the act and the amendment to the regulation on VAT exemptions, in some cases it could be a positive correction (applies to cars purchased after April 1, 2014 with a 50% deduction), i.e. allowing to recover the tax not deducted upon purchase, due to on the fact that the sale would already have to be taxed at a rate of 23%.