Initial value of a company car - how to correctly determine it?
A car may be considered a fixed asset if it is owned or jointly owned by the taxpayer, is complete and fit for use on the date of acceptance for use, the taxpayer uses it for business purposes, and the expected period of its use is longer than one year. In order to enter a car purchased for a company into the fixed assets register and subject to depreciation, it is necessary to determine the initial value of the car.
Determining the correct initial value of the car from an income tax perspective is essential. Only write-offs made in accordance with the regulations, i.e. from the correct starting value.
Initial value of the car - ways of determining
In the case of passenger cars acquired by way of purchase, the initial value may be the purchase price or the market value, depending on whether the taxpayer has a proof of purchase (invoice or contract of purchase) or not.
According to the general rule set out in Art. 22g (1) (1) of the PIT Act, the initial value of a fixed asset (including a car) acquired by way of purchase is determined on the basis of its purchase price. Pursuant to Art. 22 g of paragraph 1. 3 of the PIT Act, the purchase price is the amount due to the seller:
- increased by the costs related to the purchase accrued until the date of transferring the fixed asset or intangible and legal value for use
- reduced by the tax on goods and services, except where, in accordance with separate provisions, the tax on goods and services does not constitute input tax or the taxpayer is not entitled to reduce the amount of tax due by input tax or refund the tax difference within the meaning of the Act on tax on goods and services .
The initial value of the car calculated in this way should be possibly increased by customs duty and excise tax on the import of assets imported from abroad. The purchase price determined in the above manner is adjusted by the exchange rate differences calculated until the date of handing over the vehicle for use.
This method of determining the initial value can also be used by a taxpayer who introduces a car to the company that has been in his private property for many years. If the entrepreneur has a proof of purchase of the car (such proof may be a document containing the entrepreneur's data as the buyer, e.g. an invoice, purchase contract, VAT invoice, margin), it does not matter that its current market value is much lower than purchase price. At the same time, it should be noted that if the purchase was documented with a VAT invoice and, therefore, the taxpayer was not entitled to a VAT deduction, then when entering the vehicle into the fixed assets register, the gross amount resulting from the invoice (i.e. including VAT) should be considered as the initial value of the car.
The presented position is accepted in the interpretation of the director of the Tax Chamber in Warsaw of April 12, 2010 (No. IBPBI / 1415-53 / 10 / ESZ), or the director of the Tax Chamber in Bydgoszcz in the interpretation of January 6, 2010 (No. ITPB1 / 415- 857/09 / PSZ):
According to the general rule set out in the quoted Art. 22g section 1 point 1 of the above-mentioned of the Act, the initial value of a fixed asset acquired by way of purchase is determined on the basis of its purchase price. In the situation described in the application, the initial value should therefore be determined in the amount of the invoice confirming the purchase of the car. However, if (in accordance with separate regulations) the tax on goods and services resulting from the VAT invoice confirming the purchase of the car in question did not constitute input tax for the Applicant, or was not entitled to reduce the amount of input tax due, or to refund the tax difference in within the meaning of the act on tax on goods and services, then the purchase price of a fixed asset is not reduced by this tax. In such a situation, the purchase price will be (as indicated in the application) the gross value of the fixed asset purchased, shown in the invoice documenting the purchase.
However, if the purchase price cannot be determined due to the fact that the taxpayer does not have a proof of purchase of a fixed asset (e.g. due to the passage of time), Art. 22 g of paragraph 1. 8 of the PIT Act. It obliges to accept as the initial value the amount resulting from the valuation made by the taxpayer, taking into account the market price of the fixed asset of the same type from December of the year preceding the year in which the records were established or the list was drawn up, as well as the state and degree of its wear.
It is possible to determine the initial value of the car acquired by purchase on the basis of a market valuation made by the taxpayer, but only if its purchase price cannot be determined.
The initial value of the car - what increases it?
In the case of costs related to the purchase of a fixed asset accrued by the date of its commissioning for use, the legislator indicated in art. 22 g of paragraph 1. 3 of the PIT Act, that in particular it concerns the costs of transport, loading and unloading, insurance on the way, assembly, installation and commissioning of computer programs and systems, notary fees, fiscal and other fees, interest, commission.
Bearing in mind the above regulation and referring to the purchase by purchasing a car, it should be stated that, first of all, when determining the initial value of the car, one should take into account:
Transport and insurance costs on the way
The value of the car may be increased by the costs related to its transport from the seller to the buyer, it may be, for example, an expense incurred in connection with bringing the car on a trailer.
Other transport costs may be the employee's business trip costs incurred to complete the car purchase transaction, toll costs, as well as the fuel necessary to get the purchased car to the company's premises.
It is also worth noting that the purchase price can be increased by the expenses incurred for insurance on the way. On the other hand, the legislator did not indicate in this provision the expenses incurred for motor insurance (AC, OC, NW). These are operating expenses related to the use of the car, which do not increase its initial value, even if they were incurred before the car was entered into the fixed assets register.
Expenses for additional equipment and its installation
Expenditure on accessories and additional equipment that will be used only with a given car will also increase its initial value (for example, the cost of installing air conditioning, alarm or gas installation). Also, the purchase of a set of tires with the car may increase the initial value of the fixed asset. However, if the tires were purchased separately, after the car was purchased and put into service, they should be included directly in operating costs.
From 2019, in the case of using a fixed asset in a mixed manner (private and business), the entrepreneur may enter into tax costs only 75% of the value of expenses related to the use of this vehicle.
Costs of notary, tax and other fees
An example of such a fee is the tax on civil law transactions (PCC), which should be paid when the car is purchased from a natural person in the country. Another example of fees that will increase the initial value of the car may be the costs related to the admission of the car to road traffic, e.g. the fee for the registration document, registration plates, control sticker, or the recycling fee, which is paid in connection with the intention to register the vehicle that has been first introduced to Poland. Paying these fees and completing the formalities related to car registration will enable the taxpayer to recognize the purchased car as a fixed asset. Only then will it be possible to state that it is fit for use, which is one of the conditions for recognizing an asset as a fixed asset.
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Interest and commissions
When determining the initial value of a car classified as fixed assets, the purchase of which was financed with a loan, the taxpayer may take into account the costs of the bank commission charged when granting the loan for the purchase of the car, the cost of insuring the loan and interest on this loan, but only those accrued until the date of acceptance of the car for use. . After handing over for use and introducing the purchased car financed from a bank loan into the records, the costs of accrued and paid interest can be recognized directly as tax deductible costs.
Customs and excise duty on car imports
Another element increasing the initial value of the car is the duty and excise tax. While the customs duty is a cost typically associated with import, the excise duty on intra-Community car purchases will also be included in the initial value. The necessity to increase the initial value by the excise duty paid is due to the fact that without its payment it will not be possible to register the car and, consequently, recognize it as a fixed asset.
The amount of VAT that cannot be deducted according to the law
When determining the initial value of a passenger car, restrictions on the deduction of VAT should be taken into account. In the case of purchasing passenger cars used in the company in a mixed manner (both for business and private purposes), the taxpayer is not fully entitled to reduce the amount of tax due by input tax (only 50% of the tax amount specified in the invoice can be deducted). This means that the amount of VAT related to the purchase of a passenger car in the part that, according to the regulations, is not deductible, increases the initial value of the car. It is also worth noting that the Act explicitly mentions only situations where the provisions impose no possibility of deducting VAT or when this tax is not an input tax. As a consequence, this means that the initial value will not be increased by the non-deducted VAT if the taxpayer has not exercised his right.
Exchange rate differences resulting from the purchase of a car in a foreign currency will respectively increase or decrease the initial value of the car depending on the exchange rate used.
Other costs related to the purchase, accrued until the day the car is put into use
The listed expenses in Art. 22 g of paragraph 1. 3 of the PIT Act are examples and the catalog of costs increasing the initial value of the car is an open catalog. Thus, any costs incurred before taking the car into service, related to its acquisition and bringing it into service, will increase its initial value.
The costs associated with the purchase constitute a very wide and varied range depending, among others, on on whether the car is bought domestically or abroad. Therefore, the taxpayer, taking into account the type of car purchased and its specifications, should increase its initial value by all costs related to the purchase.
The entrepreneur bought a passenger car for PLN 49,200 gross, including VAT for PLN 9,200. For the purposes of VAT, it considered that the car was used by the so-called mixed activity. The purchase was partially financed with a loan. Pursuant to the provisions of the agreement, the bank charged a commission and a fee for loan insurance on the loan disbursement date. Additionally, the taxpayer purchased third party liability insurance prior to entering the car into the register of funds.
The initial value of the car consists of:
net value of the vehicle purchase (PLN 40,000),
VAT not deducted (PLN 4600),
the costs of the bank commission charged when granting the loan for the purchase of the car, costs of insurance of the loan and interest on this loan, but only those accrued until the date of taking the car into use.
However, the purchased car liability insurance is not included in the initial value of the car.
Finally, it is worth noting that the taxpayer, when determining the initial value of the car, should have documents confirming incurring expenses increasing the value of the fixed asset.