Renting a car with VAT-1 and VAT deduction


Deduction of VAT on cars used in business activity is one of the most discussed tax issues. This was due to changes in the provisions of the Value Added Tax Act that took place at the beginning of April 2014. The new regulations not only limited the right to deduct VAT on motor vehicles, but also imposed further obligations on taxpayers. The exception is a car recognized as a truck on the basis of a VAT-1 certificate.

As part of their business activities, entrepreneurs may use private cars (settled on the basis of vehicle mileage records), company cars introduced to the company's property and on the basis of a rental agreement. In this article, we will discuss the rules for settling VAT on expenses related to a vehicle with a VAT-1 certificate, which is used in a company under a rental agreement.

A car with a VAT-1 certificate

Motor vehicles with a VAT-1 certificate issued before April 1, 2014 are considered to be vehicles used exclusively for business activities. How to understand? Well, the design of these vehicles precludes their use for non-business purposes or makes their use for non-business purposes irrelevant.

Before April 1, 2014, the VAT-1 certificate was received by entrepreneurs who used motor vehicles, other than passenger cars, with one row of seats, which are separated from the part intended for cargo transportation by a wall or a permanent partition, classified under the road traffic regulations as a sub-type : multi-purpose, van.

After the amendment to the regulations, this certificate remained valid (unless changes were made to the vehicle resulting in failure to meet the technical conditions), thanks to which taxpayers can deduct 100% VAT from expenses related to the operation and purchase of fuel for the vehicles in question.

Certificate issued after April 1, 2014 - VAT-1a

Entrepreneurs who purchased a motor vehicle meeting the above-mentioned technical conditions (belonging to the multi-purpose sub-type, van) and conducted an additional technical inspection after April 1, 2014, received a certificate with a new name VAT-1a, i.e. a vehicle meeting the conditions provided for in Art. 86a paragraph 9 point 1 lit. and.

Using a car with a VAT-1 certificate under a rental agreement

Motor vehicles with a VAT-1 certificate are entitled to a full deduction of VAT on expenses related to the purchase of fuel, current operation, and their purchase or rental. Thus, an entrepreneur who uses such a car in business activity under a rental agreement is not covered by any restrictions resulting from the VAT Act. The taxpayer is not required to report the vehicle under VAT-26 to the tax office and to keep detailed records of the vehicle's mileage for VAT purposes. The design of cars - belonging to the sub-type of multipurpose, van - excludes their use for purposes other than those related to the activity or makes such use of the vehicle irrelevant.