A car bought abroad and payment in cash


Cars are one of the most frequently used fixed assets in business. Due to the rich and extensive automotive market, entrepreneurs can buy them not only at home, but also abroad. In the context of the introduced limits for bank payments for transactions above PLN 15,000, it is worth considering how these regulations apply to cash payments for a car purchased abroad.

New payment rules

From the beginning of 2017, new rules for making payments for one-off transactions with a value exceeding PLN 15,000 have been in force. Pursuant to Art. 22p of the PIT Act and, respectively, art. 15d of the CIT Act, taxpayers conducting non-agricultural economic activity do not include the cost in the part in which the payment related to the transaction referred to in Art. 22 of the Act of 2 July 2004 on the freedom of economic activity was made without the use of a payment account. If the expenditure is classified as tax deductible in the part in which the payment for the above transactions was made without the use of a payment account, taxpayers conducting non-agricultural business activity:

  • reduce tax deductible costs either

  • if it is not possible to reduce tax deductible costs - they increase revenues

- in the month in which the payment was made without the use of a payment account.

Next, one should refer directly to the content of Art. 22 of the Act on Freedom of Economic Activity, which states that making or accepting payments related to the performed economic activity takes place via the entrepreneur's payment account, in each case when:

  • a party to the transaction from which the payment results is another entrepreneur and

  • the one-off transaction value, regardless of the number of payments resulting therefrom, exceeds the equivalent of PLN 15,000, while transactions in foreign currencies are converted into zlotys at the average exchange rate of foreign currencies announced by the National Bank of Poland on the last business day preceding the transaction date.

First of all, it should be noted that the above provision provides for transactions made between entrepreneurs and only such purchases are subject to the limit of bank payments above PLN 15,000. Due to the fact that the Act on the freedom of economic activity uses its own, separate definition of economic activity and the definition of an entrepreneur, it is worth quoting them here. As Art. 4 of the Act, an entrepreneur is a natural person, a legal person and an organizational unit that is not a legal person, to which a separate act grants legal capacity - carrying out economic activity on its own behalf.

However, pursuant to Art. 2 of the Act, economic activity is gainful production, construction, trade, service activity as well as exploration, recognition and extraction of minerals from deposits, as well as professional activity, carried out in an organized and continuous manner.

Principles of recognition of payment costs for a car purchased abroad

In the light of the above-mentioned provisions, two hypothetical options for paying for a car purchased abroad should be considered.

First, an entrepreneur may purchase a car abroad from another entrepreneur. In this case, the rules regarding cash payment limits will apply. The analysis of the provisions does not show that the rules concerning the necessity to make bank payments in excess of PLN 15,000 apply only to relations between Polish contractors. As a result, when purchasing a car from a foreign entrepreneur, the Polish taxpayer must remember that the cash payment should not exceed PLN 15,000. Otherwise, such a transaction will not be recognized as tax deductible costs.

Taxpayers should pay special attention to the fact that in a situation where the one-off transaction value exceeds PLN 15,000 and the payment for it in full or in part is made in cash, then the entire amount of this payment cannot be recognized as tax deductible costs, and not only the surplus above the limit of PLN 15,000.

Example 1.

The Polish taxpayer purchased a passenger car from a Czech contractor. The value of the car is PLN 20,000. Payment was made entirely in cash. As a result, the Polish taxpayer cannot recognize the value of this transaction in tax deductible expenses because it has breached the statutory provisions relating to payments between contractors.

However, we will have a separate situation when a Polish taxpayer owns a car purchased abroad from a natural person who does not conduct business activity. In this variant, we do not deal with a relationship between two entrepreneurs, which means that the limit for cash transactions will not apply.

Example 2.

The Polish taxpayer purchased a passenger car worth PLN 25,000 from a private person living in Germany. The payment was made in cash. Due to the fact that the purchase took place from an entity that is not an entrepreneur, the cash transaction limit does not apply. As a consequence, the entire value of the transaction may be recognized by the Polish taxpayer in tax costs.