The Sejm adopted an act on changes to VAT on cars

Service-Tax

On February 7, 2014, the Sejm adopted an amendment to the Act amending the Act on tax on goods and services and certain other acts, concerning in particular changes in the scope of VAT deduction on the purchase of cars and the costs of their day-to-day operation. The proposed changes to the regulations are primarily aimed at defining the rules for the use of cars used both in business and privately from April 1, 2014. However, as it turns out, the changes concern a wider scope than it might seem.

Definition of a motor vehicle in the VAT Act

The amendment introduces the following notions of motor vehicles to the act: "Whenever further regulations refer to (...) motor vehicles - it is understood as motor vehicles with a maximum permissible weight not exceeding 3.5 tons, as defined in the road traffic regulations". Therefore, when analyzing the Act of June 20, 1997, Road Traffic Law, a motor vehicle will be considered a motor vehicle, the construction of which allows driving at a speed exceeding 25 km / h (this term does not include an agricultural tractor), attaching the condition directly arising from from the VAT Act, with a total weight not exceeding 3.5 tons.

Not every private use of the car will be a paid benefit

The VAT Act provides, inter alia, changes in the recognition of private car use as a paid service.

It is true that the VAT Act, Art. 8 section 2 point 1 states:

"The following are also considered as providing services against payment:

1) the use of goods that are part of the taxpayer's enterprise for purposes other than the taxpayer's business activity, including in particular for the personal purposes of the taxpayer or its employees, including former employees, partners, shareholders, members of cooperatives and their household members, members of bodies constituting legal persons , members of an association, if the taxpayer was entitled, in whole or in part, to reduce the amount of tax due by the amount of input tax on the acquisition, import or manufacture of these goods or their component parts ”.

However, the amendment to the act provides in Art. 8 adding paragraph 5, where the legislator stipulates that the above-mentioned provision (Article 8 (2) (1)) will not apply to motor vehicles used privately and in business, if the taxpayer was entitled, in whole or in part, to reduce the amount of tax when purchasing this car. due by the amount of input tax in the amount of 50% of the tax amount indicated in the purchase invoice. It will also not apply to cars purchased before the effective date of the provisions resulting from the amendment to the act, where the deducted input tax was 50% or 60% of the tax amount indicated on the purchase invoice.

Cars and the VAT Act

For the purposes of VAT deduction, the Act simplifies the division of cars into:

  • trucks over 3.5 tons - full VAT deduction (100%),

  • motor vehicles below 3.5 tonnes used only for business purposes - full VAT deduction (100%),

  • motor vehicles below 3.5 tonnes used both for business purposes and for private purposes - partial VAT deduction (50%).

Lorries over 3.5 tons

As regards trucks with a total weight of more than 3.5 tons, the amendments to the act do not envisage any revolution. In the case of these vehicles, taxpayers will be entitled to a 100% VAT deduction, both when purchasing the cars themselves and with operating expenses related to their use. Of course, assuming that their acquisition or use is related to the performance of taxable activities.

Cars with a weight not exceeding 3.5 tons used only for the purposes of business activity

In relation to these cars, the VAT Act provides for the possibility of deducting 100% VAT both when purchasing the car and for expenses related to its use only for company purposes. It is worth mentioning here that the full deduction of input tax is possible in the same way for "ordinary" passenger cars and for cars with the so-called "Checkered". However, here the legislator plans to impose on taxpayers additional conditions that must be met in order to deduct full VAT.

One of them is the obligation to submit information to the competent tax office about those vehicles that are used exclusively for business purposes.

The second is the obligation to drive mileage. According to the Act on the amendment to the VAT Act, the said register should include:

1) the registration number of the motor vehicle;

2) the start and end date of keeping the records;

3) the odometer reading of the motor vehicle on the day of the start of keeping the records, at the end of each accounting period and on the day of the end of keeping the records;

4) entry of the person driving the motor vehicle for each use of this vehicle, including:

a) consecutive number of the entry,

b) date and purpose of departure,

c) description of the route (from where - where to),

d) the number of kilometers traveled,

e) name and signature of the person driving the vehicle

- confirmed by the taxpayer as to the authenticity of the entry of the person driving the vehicle, if he is not a taxpayer;

5) the number of kilometers traveled at the end of each accounting period and on the day of ending keeping the records.

Driving mileage is to exclude private use. So if an entrepreneur or an employee records the commute from work to his place of residence, it will inform officials that he is using 100% VAT deduction illegally, as the car is also used for private purposes.

Cars below 3.5 tons used for business and private purposes

If the company uses cars used both for business and private purposes, a taxpayer conducting only taxable activity is entitled to a partial VAT deduction in the amount of 50% of the tax amount from the invoice documenting the purchase of either the car itself or other expenses related to its current use. (e.g. engine oil change, car wash), excluding fuel purchases.

Until June 30, 2015, the 50% VAT deduction does not apply to the purchase of motor fuels, diesel oil and gas used for propulsion:

1) passenger cars;

2) other than passenger cars, motor vehicles with a maximum permissible weight not exceeding 3.5 tons, in which the number of seats (seats), including the driver's seat, is:

  • 1 - if the maximum load capacity is less than 425 kg,

  • 2 - if the maximum load capacity is less than 493 kg,

  • 3 or more - if the maximum load capacity is less than 500 kg.

Online Tips

Do you run a company and have questions?

Take advantage of the expert advice of the Entrepreneur's Guide

Online advice for businesses

This means that those who own passenger cars and other cars that meet the above-mentioned criteria and are used both for business and private purposes will still not be entitled to deduct VAT (neither full nor partial) on the purchased fuel. The regulations in this matter will not change until July 2015.

Cars considered indisputably purely for business use

Pursuant to the changes effective from April 1, 2014, motor vehicles are considered to be used only for business activities if:

1) the method of using these vehicles by the taxpayer, in particular as specified in the rules of their use established by him and additionally confirmed by the vehicle mileage records kept by the taxpayer for these vehicles, excludes their use for purposes not related to economic activity or

2) the design of these vehicles precludes their use for purposes not related to business activity or makes their use for non-business purposes irrelevant.

On the other hand, according to the legislator, vehicles whose construction excludes use for private purposes are:

Online Tips

Do you run a company and have questions?

Take advantage of the expert advice of the Entrepreneur's Guide

Online advice for businesses

1) motor vehicles, other than passenger cars, with one row of seats, separated from the part intended for the carriage of cargo by a wall or a permanent partition:

a) classified on the basis of road traffic regulations into the following subtype: multi-purpose, van or

b) with the load carrying part open;

2) motor vehicles, other than passenger cars, with a driver's cabin with one row of seats and a body intended for the carriage of loads as structurally separate elements of the vehicle;

3) special vehicles that also meet the conditions contained in separate regulations for the following purposes:

a) electric / welding aggregate,

b) for drilling work,

c) excavator, backhoe-bulldozer,

d) charger,

e) a lift for maintenance and assembly works,

f) truck crane

- if the documents issued in accordance with road traffic regulations show that the vehicle is a special vehicle.

Online Tips

Do you run a company and have questions?

Take advantage of the expert advice of the Entrepreneur's Guide

Online advice for businesses

However, the fulfillment of the technical requirements for the above-mentioned motor vehicles in points 1 and 2 is ascertained on the basis of an additional technical examination carried out by the district vehicle inspection station, confirmed by a certificate issued by this station, and the vehicle registration certificate containing the appropriate annotation about the fulfillment of these requirements. However, for those listed in point 3 is found on the basis of documents issued in accordance with the road traffic regulations, if it follows from them that the vehicle is a special vehicle.

The modifications provided for by the amendment to the act fundamentally change the method of settling VAT on cars used so far. Therefore, entrepreneurs should get acquainted with the changes as soon as possible, as those relating to cars will enter into force on April 1, 2014.