VAT: Car with VAT-4

Service-Tax

The entrepreneur can deduct VAT on a car used in business activities. The April amendment to the VAT Act introduced considerable confusion with the method of settling the tax on goods and services on expenses related to cars in the company. The treatment of some vehicles has changed significantly. Technical parameters and the method of use are of key importance. You will be able to deduct VAT on vehicles used not only in your business but also privately. Is it necessary to fulfill additional obligations? Let's check.

3 groups of vehicles - conditions for VAT deduction

According to the VAT Act, cars can be divided into 3 groups:

  • with 100% VAT deduction without the need to prove that the car is used only for the business (the relevant parameters are decisive),

  • with 100% VAT deduction requiring proof that the car cannot be used outside the business,

  • with a 50% deduction assuming that the car can be used for purposes other than activities.

When can you deduct 100% VAT?

The entrepreneur is entitled to a full deduction of VAT on the purchase of a car and expenses related to it, when the vehicle is used only in business activities. This condition can be met in two ways (Article 86a (4) of the VAT Act):

  1. proving that the vehicle is used only for company purposes (in accordance with the rules established by the taxpayer) - for this purpose, you must keep a record of the vehicle's mileage and report the vehicle to the tax office on the VAT-26 form,

  2. by the design of the vehicle, which precludes its use for non-business purposes or makes its use for non-business purposes irrelevant.

There is also a group of vehicles, the ability to deduct 100% VAT is confirmed by a VAT-4 note in the registration certificate, it is a kind of confirmation of the technical conditions of the vehicle. In such a situation, the taxpayer must, however, take into account the need to perform additional tests carried out by the district vehicle inspection station.

Deduction of 100% VAT - compendium

The design and technical parameters are a key determinant of whether a vehicle is used solely for company purposes. You can safely deduct 100% VAT from:

  • trucks over 3.5 tons,

  • special vehicles (excavator, loader ...),

  • cars with VAT-1, VAT-3, VAT-4 certificates.

Deduction of 100% VAT on vehicles below 3.5 tonnes requires meeting a number of conditions and additional testing. Such a vehicle may only be used for business purposes.

50% VAT deduction on mixed-use cars

If the car is used in a mixed manner, i.e. for business and private purposes, only 50% VAT can be deducted from it. Importantly, this solution does not require any additional activities from the taxpayer related to the keeping of vehicle mileage records for VAT purposes or reporting to the tax office.

It is worth remembering, however, that, as a rule, the remaining 50% of non-deducted VAT will be tax deductible costs. Thus, it will not reduce the VAT due, but it will reduce the PIT liability. According to Art. 23 sec. 1 point 43 lit. and the cost of obtaining revenue may be:

input tax (...) - in the part in which, in accordance with the provisions on tax on goods and services, the taxpayer is not entitled to a reduction in the amount or refund of the difference in tax on goods and services - if the input tax on goods and services does not increase the value of the fixed asset or intangible assets.