New income tax regulations applicable from 1 January 2019, are in the way of entrepreneurs who rent passenger cars.
Companies that rent passenger cars (rent a car) often use external financing, most often in the form of leasing. They then rent a rented car to a customer. To date, entrepreneurs operating this type of leasing instalment could fully count as revenue costs.
The problem came from 1 January 2019 According to the new legislation, both leasing instalments and depreciation write-offs can be fully included in the tax costs for cars with a value up to 150,000 PLN.
In this way, the legislator wanted to equalize the rules on deductions related to the use of passenger cars, regardless of the basis on which the entrepreneur uses the car.
The new rules surprised the rent-a-car companies as the depreciation restriction was not intended to cover leasing companies and car rental companies.
It turns out that the exception to the expected lack of limit is the situation where the entrepreneur takes the car into leasing to then rent it. This was confirmed by the Director of National Tax Information in the interpretation of 24 May 2019 (0112-KDIL3-3.4011.93.2019.2.AA).
The application for an individual tax interpretation was submitted by an entrepreneur (natural person) dealing with short- and long-term rental of passenger cars. In April of this year, this entrepreneur leased a passenger car with a value exceeding 150,000 PLN, to rent it.
He wanted to make sure that he could count all the lease payments from revenue. The Director of KIS’s reply shows that the exemption of rules Article 23(5b) Act dated 26 July 1991 on personal income tax (Journal of Laws of 1991, item 350) in this case, it is not possible.
The Director of KIS stated that this exemption does not apply to the situation in which the entrepreneur found himself, noting that the provision excludes the application of the limit 150,000 PLN only in the case of depreciation. This means that the exemption applies only to passenger cars included in the register of fixed assets.
From the interpretation of the director of KIS we can conclude that the limit 150,000 PLN not applicable taxpayer renting out cars, If he bought a car and didn't lease it.
Already at the consultation stage on the rules to apply from 1 January 2019 the organization of employers proposed that the Ministry of Finance should waive the limitation of the cost of obtaining revenues for entrepreneurs who in 100% use cars as part of their business. This procedure would help avoid the situation in this article. This proposal was ultimately contested and was not introduced into the bill.
We do not know whether this procedure is an intentional act of the legislature, or if it is a mere omission. It is the hope of entrepreneurs operating car rental companies to regulate the provisions in this respect with the forthcoming amendment. The situation in which the limit is covered by an entrepreneur himself not using a passenger car, but merely passing it on to his client for use, does not seem entirely right.
Author: Paweł Boś, Law student at Leon Kozminski Academy in Warsaw, employee Russell Bedford