Limit on fuel expenses and car operating costs in 2021

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At the beginning of 2019, regulations limiting the possibility of reducing revenues by costs related to the operation of passenger cars entered into force. The changes will apply to both company and private vehicles used in business activities. The article explains the limit of fuel expenses and car operating costs depending on the vehicle owned by the company.

Limit on fuel expenses and car operating costs in 2021

In connection with the entry into force of the Act of 23 October 2018 amending the Act on personal income tax, the Act on corporate income tax and certain other acts, from January 1, 2019, the possibility of recognizing the expenses related to the use of the vehicle in the costs of obtaining revenue has been significantly reduced. The amount of the limit depends on the type of vehicle used in the company. In 2021, these limits were maintained at their current levels.

A company car and the operating expenses limit

The amendment to the PIT Act introduced a limit of fuel expenses and operating costs of a passenger car used both privately and for business purposes at the level of 75%. Art. 23 sec. 1 point 46a of the PIT Act:
25% of the expenses incurred, subject to paragraph 36, for the costs of using a passenger car, other than that specified in paragraph 46, for the purposes of the taxpayer's business activities shall not be considered as tax deductible costs - if the passenger car is also used for purposes not related to business business conducted by the taxpayer. In practice, this means that an entrepreneur using a company vehicle also privately is obliged to recalculate the value from invoices documenting the purchase of fuel or operating expenses in proportion to the established limit. As a result, the tax cost is only 75% of the total invoice value. Moreover, in the case of active VAT payers using a company car for mixed purposes, 50% of the non-deducted VAT is still a tax cost, and therefore is taken into account when determining the limit.

In the case of determining the use of a company vehicle, the legislator indicated in the PIT Act that if the taxpayer does not keep records of the vehicle mileage for VAT purposes, it should be considered that the vehicle is also used privately - this provision does not apply to non-taxable persons.

Example 1.

Entrepreneur Michał, an active VAT payer, has a car in the company under an operating lease agreement. He uses it both privately and for business purposes. In January 2021, he purchased fuel for the vehicle with a gross value of PLN 1,230. How much of the invoice will be tax deductible?

75% * (PLN 1,000 + PLN 115 not deducted VAT) = PLN 836.25

Mr. Michał will include PLN 836.25 in tax costs.

Entrepreneurs using a passenger car only for business purposes can still deduct all expenses related to the vehicle in their company costs. However, this involves the need to complete additional formalities, as the full deduction of operating costs results in the obligation to keep additional records for VAT purposes.

Private car - no more mileage left for PIT purposes

A certain simplification has been introduced for private cars used in business activities. Namely, from 2019, the obligation to keep mileage allowances for PIT purposes has been abolished, with the exception of employee settlements as part of business trips or local trips. An entrepreneur using a private car in his business deducts only 20% of operating expenses for fuel and operating costs of the car, regardless of the kilometers traveled as part of the business.

Example 2.

Entrepreneur Stanisław (active VAT payer) uses his private car in his business. In January 2021, he purchased car wipers worth PLN 246. How should he settle the invoice in the light of the new regulations?

20% * (PLN 200 + PLN 23 not deducted VAT) = PLN 44.60

The entrepreneur may include only PLN 44.60 from the invoice as tax costs.

The regulations on the limits of recognizing operating expenses in tax deductible costs introduce significant restrictions and certainly contributed to the increase of liabilities towards the tax authorities for many entrepreneurs.

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Posting vehicle-related expenses in the wfirma.pl system

When booking expenses related to a vehicle used in the company (other than a fixed asset), first add the car to the system via the tab RECORDS »VEHICLES» ADD VEHICLE, where you should specify:

  • car name,
  • registration number,
  • type,
  • method of use,
  • form of ownership.

On the basis of the defined definition of the vehicle, the system will assign to it an appropriate limit of fuel expenses and car operating costs. Details of adding a vehicle to the wfirma.pl system are described in the article: Adding a vehicle to the system.

Accounting of car-related expenses in the wfirma.pl system is done through the EXPENSES »ACCOUNTING» ADD »VAT INVOICE / NO VAT INVOICE tab. In the next step, it is necessary to choose one of the two types of expenses, depending on what the invoice concerns:

  • PURCHASE FUEL FOR A VEHICLE
  • OTHER EXPENSES RELATING TO THE CURRENT USE OF THE VEHICLE.

In the field NET VALUE enter the full net amount from the invoice, and select the vehicle to which the expense relates as the VEHICLE. In this way, the system will automatically determine the amount of the cost to be deducted, taking into account the limit for a given car.