Withdrawal of a passenger car for private purposes on the basis of PIT and VAT

Service-Tax

An entrepreneur using a passenger car in his company may at any time decide to withdraw it for private purposes. What consequences will this event have in terms of personal income tax and VAT? Check if the recall of a passenger car for private use qualifies the depreciation to be included in the costs!

Passenger car withdrawal for private purposes - income tax

The mere fact of withdrawing a passenger car for private use on the basis of personal income tax will not have major effects. There are only two consequences:

  1. the unredeemed part of the initial value of the fixed asset may not constitute a tax deductible cost (the current depreciation write-offs are not derecognised from costs);
  2. the sale of the car within 6 years (counting from the month following its withdrawal) from its withdrawal for private purposes will constitute the income from the activity, which the entrepreneur should prove and tax.

Additionally, when recalling a passenger car for private purposes, the entrepreneur should delete it from the fixed assets register. The last depreciation charge may be included in the tax costs in the month of the vehicle recall for personal purposes.

In a situation where a taxpayer sells a passenger car withdrawn for private use before the expiry of 6 years, then at the time of sale its unamortized initial value may constitute a tax cost.

Withdrawal of a passenger car for private purposes - VAT

When withdrawing a fixed asset for private purposes, the taxpayer must take into account that this event may have specific consequences in terms of value added tax. What? We explain below.

When there was a right to a partial or full VAT deduction

In a situation where the entrepreneur was entitled to a partial or full VAT deduction when purchasing a passenger car or its component parts, at the time of its withdrawal, he is obliged to tax this event with VAT. This obligation results from Art. 7 sec. 2 of the VAT Act:

“By the delivery of goods referred to in Art. 5 sec. 1, paragraph 1, shall also mean the transfer of goods belonging to his enterprise free of charge by the taxpayer, in particular:
1) the transfer or consumption of goods for personal purposes of the taxpayer or its employees, including former employees, partners, shareholders, shareholders, members of cooperatives and their household members, members of the governing bodies of legal persons, members of the association,
2) any other donation
- if the taxpayer was entitled, in whole or in part, to a reduction in the amount of tax due by the amount of input tax on the acquisition, import or manufacture of these goods or their component parts. "

Then, in order to calculate VAT, the entrepreneur may draw up an internal document, which will be the basis for entries in the VAT sales register. In addition, from October 1, 2020, the correction of VAT made in connection with the recall of the vehicle for private purposes will have to be marked as WEW in the registration part of the new JPK_V7 file. A detailed discussion of the additional markings used in the JPK_V7 file can be found in the article: Markings of purchase and sale documents in JPK V7M and JPK V7K Additionally, in this matter, Art. 90b of the VAT Act, which regulates the correction of deducted input VAT:

Initial value of the vehicle

Correction of deducted VAT

up to PLN 15,000

The correction of the deducted VAT is obligatory when the car is withdrawn for personal purposes within 12 months from the month in which the car was purchased, imported or commissioned for use.

above PLN 15,000

The correction of the deducted VAT is obligatory in a situation where the withdrawal of the passenger car takes place within 5 consecutive years after the end of the year in which the vehicle was commissioned for use.

When there is no right to deduct VAT

In a situation where the entrepreneur did not have the right to a partial or full deduction of VAT on the purchase of the vehicle and its components, the taxpayer will not be obliged to tax the recall of the passenger car with VAT. There will also be no VAT correction here.

When is a taxpayer not entitled to a VAT deduction?
1.when the purchase has been documented with: a bill, a purchase contract, a VAT invoice, margin,
2. when at the time of purchase it was an entity exempt from VAT.

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Withdrawal of a passenger car from the wFirma.pl system

In order to withdraw a vehicle constituting a fixed asset in the wfirma.pl simplified accounting system, go to the RECORDS »FIXED ASSETS tab, select the appropriate fixed asset and select the LIQUIDATION option.

The window for adding a liquidation protocol will appear. It is important to select the appropriate option in the Posting of remaining write-offs field:

  • YES - The rest of the depreciation write-offs in the case of liquidation of not fully depreciated fixed assets will be posted to the KPiR (initial value reduced by already posted depreciation write-offs).
  • NO - The rest of the depreciation write-offs in the event of liquidation of not fully depreciated fixed assets will not be posted to costs in the KPiR.

In the case of a free-of-charge transfer of the fixed asset for private use, select NO.

If the purchase of the vehicle or its essential components was entitled to deduct VAT, at the time of its withdrawal, VAT should be charged on the internal document and entered into the system by direct entry into the sales VAT register according to the scheme via the tab RECORDS »SALES VAT REGISTER» ADD ENTRY, where check the NO CONTRACTOR option and fill in the necessary data. Then, in the ADVANCED sub-tab, select the INTERNAL DOCUMENT option.