Small entrepreneurs often use passenger cars in their business as a permanent measure. Such a car may be withdrawn from business at any time and transferred to the private property of the company's owner. However, this shift gives rise to certain tax effects.
In principle, under personal income tax, the transfer of a car to private purposes will be tax neutral. However, the taxpayer will have to keep certain formalities related to the entry from the records of fixed assets of an appropriate endorsement of the reason for the withdrawal of the fixed measure from business.
At the same time, it must stop charging depreciation. It is worth noting that if the car has not been fully depreciated, the part of the initial value cannot be included in the cost of obtaining revenue.
However, tax may be subject to later sale of the car. It points to that Article 10(2)(3) the PIT Act, which states that the disposal of a vehicle withdrawn from business activity within the time limit 6 years from first on the day of the month following the month in which the car was withdrawn, the taxable income will arise.
Taxable persons who had the right to deduct only 50% vat, due to the use of the car for mixed purposes, will be entitled to make a correction of the input tax if the transfer to personal use occurs during the adjustment period
In VAT, the transfer of a car which is part of a company for personal purposes to a taxable person has been compared with the payment of the supply of goods and is, in principle, subject to taxation provided that the taxable person was entitled, in whole or in part, to reduce the amount of tax due by the amount of input tax due on the purchase, import of the car or its component.
Therefore, if the entrepreneur is a taxpayer, he deducted the VAT and when purchasing the passenger car 100% or 50% vat billed, he will have to move the car to private property as much as selling and taxing. The tax base in this case will be the car market price at the date of its withdrawal from business.
At the same time, taxpayers who were only entitled to deduct 50% vat, due to the use of the car for mixed purposes, will be entitled to make an adjustment to the input tax if the transfer for personal purposes occurs during the adjustment period (depending on the value of the car, the period is 12 or 60 months).
However, taxpayers who, when purchasing a car, do not have the right to deduct input tax will not be obliged to tax the transfer of the car for personal purposes.
This may be the case in case of the purchase of a car from a natural person who does not have a business activity or from another entrepreneur, but on the basis of a vat margin which does not provide for the right to deduct input tax.
In a slightly different situation there will be taxpayers, who did not have the right to deduct tax on purchase, but used it when purchasing car parts. The provision indicates that, in principle, this activity is taxable.
However, in this case, it is necessary to examine whether the mounted parts (goods) have caused a lasting increase in the value of the car and whether they have been consumed by the taxpayer since their installation.
In principle, the deduction of input tax on the purchase of operating parts such as shock absorbers, brake blocks, tyres, oils and other liquids will not be a consequence of the tax on the free transfer of the car for personal purposes.
This expenditure is usually directly included in the cost of obtaining income, which does not increase the initial value of the car. At the same time, it should be noted that these are parts that are subject to relatively rapid consumption, i.e. consumption by the taxpayer.
Such a position can be found, for example, in the interpretation of the Director of National Tax Information on 12 January 2018 0112-KDIL2-2.4012.489.2017.2.AP.
However, if the taxpayer replaces components affecting the increase in the initial value of the car, after which it is transferred for private use within a short period of time, he will be required to tax this activity. In this situation, the tax base will be the market value of these components.
Author:
Marcin Kołkowicz
Tax advisor, tax consultant at Russell Bedford Poland Sp. z o.o., graduate of the Administration, Management and Marketing of the Catholic University of Lublin named after John Paul II. The subject of tax law deals with from 2012. He gained experience in Lublin and in Warsaw tax advisory offices. Author and co-author of many tax publications, in particular for Tax and Tax Portal TaxFin.pl. In his career, he dealt with both direct and indirect taxation issues, with particular emphasis on VAT.