VAT deduction for cars - 2014

Service-Tax

In Polish tax regulations, there have practically always been restrictions on the deduction of VAT on the purchase and operating costs of passenger cars. In the current legal state, an entrepreneur cannot deduct VAT on fuel purchased to drive such a vehicle. The reason why the Ministry of Finance has established such solutions is the fact that passenger cars are often used for both corporate and private purposes.

At the beginning of 2014, new regulations are to enter into force on the deduction of VAT on the purchase of means of transport, as well as expenses related to their use.

VAT tax and passenger car until the end of 2013

Restrictions on the deduction of VAT for passenger cars effective from January 1, 2011until 31 December 2013, result from the Act of 16 December 2010 amending the Act on tax on goods and services and the Act on road transport. According to Art. 3 sec. 1 above of the Act, in the case of the purchase of passenger cars and other motor vehicles with a maximum permissible weight not exceeding 3.5 tons, the amount of input tax is 60 percent. the tax value specified in the invoice or the amount of tax due on intra-Community acquisition of goods or the amount of tax due on the delivery of goods for which the buyer is the taxpayer - but not more than PLN 6,000.

Restrictions also apply to recipients of passenger cars and other motor vehicles on the basis of a rental, lease, leasing or other contract of a similar nature. In such a situation, the entrepreneur can only deduct 60 percent. the amount of the input tax on the rent (installments) or other payments resulting from the concluded contract, documented by an invoice, but not more than PLN 6,000 (Article 3 (6)).

Importantly, the limitations in this regard, in accordance with Art. 3 sec. 2 of the Act are not subject to:

  1. motor vehicles with one row of seats, separated from the part intended for the carriage of loads by a wall or a permanent partition, classified under the provisions of the road traffic law into the following sub-type: multi-purpose, van,

  2. motor vehicles with more than one row of seats which are separated from the part intended for the carriage of goods by a wall or a permanent partition, and whose length of the part intended for the carriage of goods, measured on the floor from the farthest point of the floor allowing the erection of a vertical wall or a permanent partition between the floor and the ceiling to the rear edge of the floor, exceeds 50 percent. vehicle length; for the calculation of the proportion referred to in the preceding sentence, the length of the vehicle is the distance between the lower edge of the vehicle's windscreen and the rear edge of the floor of the cargo section of the vehicle, measured horizontally along the length of the vehicle between the lower edge of the vehicle's windscreen and a point derived vertically from the rear edge of the floor of the part of the vehicle intended for the carriage of goods,

  3. motor vehicles that have an open part intended for the transport of loads,

  4. motor vehicles that have a driver's cabin and a body intended for the transport of loads as structurally separate elements of the vehicle,

  5. motor vehicles which are special vehicles within the meaning of the road traffic law, listed in the annex to the Act (e.g. armored car, charger, funeral vehicle),

  6. motor vehicles designed for the transport of at least 10 people, including the driver - if such use is indicated in the documents issued on the basis of road traffic regulations,

  7. cases where the subject of the taxpayer's activity is:

  • resale of these cars (vehicles), or
  • putting these cars (vehicles) to use against payment on the basis of a rental, lease, leasing or other contracts of a similar nature, and these cars (vehicles) are intended solely by the taxpayer to be used for these purposes for a period of at least six months.

The tax on goods and services is not deductible at all in the case of purchased motor fuels, diesel oil and gas used to power passenger cars and other motor vehicles (specified in Article 3 (1) of the Act).

VAT on cars in 2014

From the beginning of 2014, when it comes to deducting VAT on expenses related to the purchase and use of means of transport, entrepreneurs will face a small revolution. According to the newly added Art. 86a paragraph 1 of the act on tax on goods and services, in the event of the entrepreneur purchasing:

  • passenger cars,
  • other than passenger cars, motor vehicles with a maximum permissible weight not exceeding 3.5 tonnes

- only 60 percent is deductible. VAT, but not more than PLN 6,000.

At this point, it is worth noting that the catalog of vehicles which, in accordance with the Act, will be able to exercise the right to a full VAT deduction, are added to other motor vehicles with the number of seats (seats), including the driver's seat, amounting to:

  • 1 - if the maximum load capacity is equal to or greater than 425 kg,
  • 2 - if the maximum load capacity is equal to or greater than 493 kg,
  • 3 or more - if the maximum load capacity is equal to or greater than 500 kg.

The permissible load capacity of these vehicles and the number of seats (seats) are determined on the basis of documents issued in accordance with the provisions of the road traffic law.

The entrepreneur will still have to prove that the vehicle meets the technical requirements with the appropriate certificate. It should be issued by the district vehicle inspection station conducting the test. In addition, the vehicle registration certificate must contain an appropriate note that these requirements have been met.

If, after the certificate has been issued, changes have been made to the vehicle, which consequently result in the above-mentioned requirements not being met, the taxpayer must correct the amounts of the input tax in the settlement for the period in which it was deducted (Article 86a (6)).

In a situation where the subject of the entrepreneur's activity is resale or use of these cars (vehicles) for remuneration under a rental, lease, leasing or other contracts of a similar nature, then he is not subject to restrictions on the deduction of VAT upon its purchase. (Article 86a (3)).

No modifications have been made to the provisions on the use of passenger cars and other motor vehicles (referred to in Article 86a (1)) on the basis of a rental, lease, leasing or other similar contract by service recipients. Only 60 percent is still deductible. input VAT, but the sum of the amounts over the entire period of use of cars and vehicles for one car or vehicle may not exceed the amount of PLN 6,000.

According to the new art. 88a paragraph. 1, taxpayers will still not be able to deduct VAT on motor fuels, diesel oil and gas purchased to drive a passenger car and motor vehicles up to 3.5 t (specified in Article 86a (1) of the Act).

To sum up, the amended tax regulations only expand the catalog of vehicles to which the VAT deduction restriction will not apply. In such cases, taxpayers will be entitled to a 100% deduction. the value of the input tax resulting from the car purchase invoice. In such a case, the right to deduct VAT will also cover the purchase of fuel for motor propulsion.