Instructions for the recognition of costs and tax revenues for the use of passenger cars other than those used under a lease, lease, lease or other similar contract

Tax clearances resulting from the use of the car in the course of business are one of issues of much doubt in practice, since in this area a number of specific regulations are provided for in both the Law of 15 February 1992 on corporate income tax 1 (Come on.

the Corporate Income Tax Act), as well as the bill with 26 July 1991 on personal income tax 2 (Further u.p.d.o.f.). What are the rules for recognising expenditure relating to such use as tax costs, such as depreciation deductions, as are the limits for depreciation of a passenger car?

In 2019, what has changed in the rules governing the clearing of costs associated with the day-to-day operation of cars after 1 January 2019?

1. Comment

1.1. Tax definition of a passenger car

Before examining the principles of cost recognition and tax revenues for the use of a passenger car in the course of its activities, the importance of the concept of a passenger car on the ground should be pointed out the Corporate Income Tax Act and u.p.d.o.f. and then define one the adopted models for the use of such a vehicle.

Definition of the passenger car included under Article 4a(9a) the Corporate Income Tax Act (Article 5a(19a) u.p.d.o.f.). According to it, a vehicle within the meaning of the traffic regulations with a maximum permissible mass not exceeding 3.5 tonnes, designed to carry no more than 9 persons including the driver, except:

1. a vehicle having one a row of seats which is separated from the part intended to carry loads by a wall or a durable bulkhead:

(a) classified under traffic rules to sub-species: multitasking, van or

(b) with an open part intended for carrying cargo;

1. a vehicle that has a driver's cab with one row of seats and bodywork intended to carry loads as structurally separate components of the vehicle;
2. a special vehicle if the documents issued in accordance with traffic regulations show that the vehicle concerned is a special vehicle and if the conditions contained in the separate provisions set out for the following uses are also fulfilled:

(a) electrical/welding unit,

(b) for drilling,

(c) excavator, excavator,

(d) the charger,

(e) a lift for maintenance and assembly work,

(f) a crane;

1. vehicle as defined in the regulations issued under Article 86a(16) the VAT Act

Therefore, specific provisions the Corporate Income Tax Act ((u.p.d.o.f.) as regards the recognition of the costs of obtaining revenues related to the acquisition or use of a passenger car, respectively, shall be applicable in any event in which the taxable person bears the costs related to a vehicle considered to be a passenger car within the meaning of the provisions laid down.

1.2. Options for the use of a passenger car in business activity

In the practice of economic life, there are several options for using a passenger car in the course of business activity. first of them is a situation where a passenger car is a component of the company's assets which constitute a permanent measure. In addition to this typical formula for the use of a passenger car in the course of business (for the purposes of this activity) there are also a number of other options in practice, including in particular:

• 1) the use of the private car of the entrepreneur for the purposes of the business,
• 2) the use of a passenger car included in the assets of an undertaking which is not eligible as a permanent measure,
• 3) use in the course of the business of a car on the basis of a lease, lease, lease or other similar contract 3 and
• 4) the use by employees of their private car for the purposes of the employer in connection with business trips.
• 1.3. A vehicle which is a corporate property, qualified as a permanent measure
• 1.3.1. General principles for recognising expenditure as a tax cost

A model solution for the use of a passenger car in the course of a business activity is that such a vehicle has been acquired within the framework and for the purposes of its activity. Such purchased vehicle is a corporate asset which, in the event of compliance with the conditions of the regulations, Article 16a(1) the Corporate Income Tax Act (Article 22a(1) (u.p.d.o.f.) is considered permanent. Subject to Article 16a(1) the Corporate Income Tax Act amortisation shall be subject, subject to Article 16c the Corporate Income Tax Act, owned or jointly owned by the taxable person, acquired or produced in his own right, complete and fit for use on the date of acceptance for use:

• 1) buildings, buildings and premises owned separately,
• 2) machinery, equipment and means of transport,
• 3) other items

• of an estimated period of use longer than one year, used by the taxable person for purposes related to his business activity or put into service under a lease, lease or contract specified under Article 17a(1) the Corporate Income Tax Act (lease agreement), called fixed assets (the same arrangement was envisaged under Article 22a(1) u.p.d.o.f.).

From the basic principle relating to the correct recognition of the tax costs associated with the use of a passenger car by a taxable person, under Article 15(1) the Corporate Income Tax Act (Article 22(1) u.p.d.o.f.) it is clear that the tax costs of obtaining revenue are considered to be costs incurred in order to achieve revenue (from the source of revenue on the basis of the Corporate Income Tax Act) or the behaviour or security of its source, but except for those costs which are indicated in the so-called negative tax cost catalogue specified under Article 16 the Corporate Income Tax Act (Article 23 As a result of this principle, which is de facto a determinant to recognise a given cost as a tax cost, it must be concluded that, under both tax laws, only such a cost can be regarded as a tax cost which meets the following cumulative conditions:

• 1) has been incurred in order to obtain income, preserve or secure its source,
• 2) not mentioned under Article 16(1) the Corporate Income Tax Act (Article 23(1) (u.p.d.o.f.) as a cost not constituting the tax cost of obtaining revenue,
• 3) has been duly documented.

Standard Article 16(1)(1) the Corporate Income Tax Act establish unequivocally that expenditure on: acquisition of land or perpetual land use rights, with the exception of charges for perpetual land use, acquisition or self-production other than those mentioned in point (a) shall not be considered as revenue costs. 1 (Article 16(1)(1) (a)(i)(i)(ii) Article 16g(13) the Corporate Income Tax Act increase the value of fixed assets on which depreciation is calculated.

These expenditure, updated in accordance with separate provisions, minus the sum of the depreciation premiums in question under Article 16h(1)(1) the Corporate Income Tax Act, will, however, constitute the cost of obtaining revenue in the event of a paid sale of fixed assets or of a CHP regardless of the time during which they are incurred.

A similar solution for assets related to business activity is envisaged under Article 23(1)(1) u.p.d.o.f. Therefore, in the case of assets deemed to be fixed assets, in accordance with the regulations laid down, the tax costs arising from the acquisition or manufacture of such tangible assets will be the result of depreciation deductions made, in accordance with the arrangements in force in this respect under both income tax laws.

1.3.2. Depreciation of a fixed vehicle

1.3.2.1. Amortisation write-downs representing revenue costs

Disposition Article 15(6) the Corporate Income Tax Act sets out that the cost of obtaining revenue is the write-downs for the consumption of fixed assets and of WNiP (depreciation deductions) made exclusively in accordance with the rules Article 16a-16m the Corporate Income Tax Act, including Article 16 the Corporate Income Tax Act The same solution on the basis of the regulations of u.p.d.o.f.

provides Article 22(8) u.p.d.o.f., which indicates that the costs of obtaining revenue are write-downs for the consumption of fixed assets and WNiP (depreciation deductions) made only in accordance with Article 22a-22o u.p.d.o.f., taking into account Article 23 u.p.d.o.f.

These regulations form the principle that only those depreciation write-downs which have been made in accordance with the depreciation rules provided for in the Corporate Income Tax Act or u.p.d.o.f.

Thus, tax revenues costs do not constitute depreciation deductions that have not been made under regulation Article 16a-16m the Corporate Income Tax Act or, respectively, Article 22a-22o u.p.d.o.f.

Tax revenue costs are only those depreciation deductions which have been made in accordance with the regulations Article 16a-16m the Corporate Income Tax Act (Article 22a-22o u.p.d.o.f.), taking into account provisions excluding individual costs from the possibility of their being credited with tax costs (foreseen) under Article 16 the Corporate Income Tax Act and Article 23 u.p.d.o.f.).

1.3.2.2. Tax depreciation methods of a permanent passenger car

When discussing the issue of depreciation off a passenger car constituting a permanent measure, it is worth noting the possible tax depreciation methods available to taxpayers of this particular permanent measure. Among the options available for tax depreciation of a passenger car considered to be a permanent measure are:

1. one-off depreciation — available for passenger cars included in fixed assets only where indicated under Article 16f(3) the Corporate Income Tax Act (Article 22f(3) u.p.d.o.f.), and therefore when the initial value of the solid is equal to 10,000 PLN or lower;
2. linear depreciation — basic depreciation method, based on the depreciation rates set out in the list of depreciation rates Article 16i(1) the Corporate Income Tax Act (Article 22i(1) u.p.d.o.f. It should be noted that the depreciation rate for passenger cars (KŚT) 741), is 20%. This means that, using this rate, the passenger car is subject to tax depreciation by 5 years;
3. Accelerated linear depreciation — this depreciation option allows the linear depreciation process to be accelerated by applying the coefficients provided for under certain circumstances. Subject to Article 16i(2)(2) the Corporate Income Tax Act (Article 22i(2)(2) (u.p.d.o.f.) taxable persons may increase the rates included in the list of depreciation rates, including for means of transport (except for means of transport by boat) used more intensively in relation to average conditions or in need of specific technical efficiency, using no higher coefficients than during this period than 1.4.

However, the application of this coefficient requires demonstrating that the mode of transport (e.g. a passenger car) is:

(a) used more intensively in relation to average conditions, or

(b) requires specific technical efficiency. Please note that according to Article 16i(3) the Corporate Income Tax Act (Article 22i(3) (u.p.d.o.f.) in the event of the existence or cessation of conditions justifying an increase in the rates on the basis of Article 16i(2)(2) the Corporate Income Tax Act (Article 22i(2)(2) (u.p.d.o.f.) they shall be increased or reduced from the month following the month in which the circumstances justifying those amendments existed;

1. individual depreciation – according to Article 16j(1)(2) the Corporate Income Tax Act (Article 22j(1)(2) (u.p.d.o.f.) available for used or improved means of transport for the time being first entered in the records of the taxable person concerned, with a depreciation period not less than 30 months. In this case, for means of transport:

(a) used, those in respect of which the taxable person proves that they were used at least by 6 months,

(b) improved, the expenditure incurred by the taxable person for their improvement prior to entry into the records shall be deemed to constitute at least 20% baseline.

It is worth noting that it is not possible to apply degressive depreciation to passenger cars, as it provides for Article 16k(1) the Corporate Income Tax Act (Article 22k(1) In addition, no solution is available due to Article 16k(7) the Corporate Income Tax Act (Article 22k(7) u.p.d.o.f.), in the light of which taxpayers in the tax year in which they started (including Article 16k(11) the Corporate Income Tax Act and Article 22k(11) u.p.d.o.f.) and small taxpayers may make one depreciation deductions from the initial value of fixed assets included in the group 3-8 CIT, excluding passenger cars, in the tax year in which those measures were entered in the accounts of fixed assets and of the CIT, up to an amount not exceeding the equivalent in the tax year 50,000 EUR the total value of these depreciation write-offs.

Therefore, this preferential form of depreciation, allowing for one-off depreciation within the limits of the fixed limit 50,000 EUR, as de minimis aid, may not be applied to passenger cars constituting fixed assets.

One-off depreciation due to regulation is also not available Article 16k(14-21) the Corporate Income Tax Act (Article 22k(14-21) u.p.d.o.f.), introduced into the legal order 12 August 2017 (as a result of the entry into force of the Act of 7 July 2017 amending the Personal Income Tax Act and the Corporate Income Tax Act 4 ).

It applies to pre-owned new fixed assets included in groups 3-6 and 8 CTC and therefore excluding means of transport.

According to Article 16k(7) the Corporate Income Tax Act (Article 22k(7) (u.p.d.o.f.) a one-off depreciation of a passenger car under the so-called ‘one-off depreciation’ which constitutes de minimis aid is unacceptable.

1.3.2.3. New limits on car depreciation In 2019

It is necessary to pay attention to specific regulations the Corporate Income Tax Act and u.p.d.o.f., restrictions on the possibility of crediting depreciation off the initial value of a passenger car constituting a durable measure to the tax costs of obtaining revenue. Pre-established Article 15(6) the Corporate Income Tax Act (Article 22(8) (u.p.d.o.f.) indicates that consideration is required Article 16 the Corporate Income Tax Act (Article 23 u.p.d.o.f.) when recognising the costs of obtaining revenue resulting from depreciation write-downs by the taxpayer. To the end 2018 – according to Article 16(1)(4) the Corporate Income Tax Act (Article 23(1)(4) u.p.d.o.f.) – no write-offs for the use of a passenger car were considered to be the cost of obtaining revenue, based on defined rules under Article 16a-16m the Corporate Income Tax Act (Article 22a-22o u.p.d.o.f.), in a part determined from the value of the car exceeding the equivalent of:

• 1) 30,000 EUR – in the case of a passenger car as an electric vehicle within the meaning of Article 2(12) Electromobility Act,
• 2) 20,000 EUR – in the case of other passenger cars, converted into Polish gold at the average euro rate announced by the NBP on the day of the transfer of the car for use.

From 1 January 2019 the provisions of the Act of 23 October 2018 amending the Personal Income Tax Act, the Corporate Income Tax Act and certain other acts 5 (hereafter: Amending Act) introduced a substantial amendment Article 16(1)(4) the Corporate Income Tax Act (Article 23(1)(4) u.p.d.o.f.) Named according to the currently applicable sound Article 16(1)(4) the Corporate Income Tax Act (Article 23(1)(4) (u.p.d.o.f.) no write-downs for the use of a passenger car shall be considered to have been incurred in accordance with the rules laid down under Article 16a-16m the Corporate Income Tax Act (Article 22a-22o u.p.d.o.f.), in the part determined from the value of the car exceeding:

• 1) 225,000 PLN – in the case of a passenger car as an electric vehicle within the meaning of Article 2(12) Electromobility and Alternative Fuels Act 6 (hereinafter: Electromobility Act),
• 2) 150,000 PLN – for other passenger cars.

In the area of these regulations, therefore, there has been a significant increase in the value of depreciation from a passenger car, which may be accounted for by taxpayers in the tax burden of obtaining revenue.

In addition, as a result of the amendment Article 16(1)(4) the Corporate Income Tax Act (Article 23(1)(4) u.p.d.o.f.) has abandoned the current principle of giving the limit of depreciation deductions made from the value of the passenger car as the equivalent of the amount in euro to the nominal value of this limit in PLN.

This procedure eliminated the need to determine individually the amount of depreciations made from the initial value of the fixed vehicle (car) which could be classified as tax costs for each passenger car being put into service as a durable vehicle, resulting from the obligation to take the course from the date of adoption of the car for use.

Importantly, in the light of availability Article 16(5b) the Corporate Income Tax Act (Article 23(5b) (u.p.d.o.f.) recipe Article 16(1)(4) the Corporate Income Tax Act (Article 23(1)(4) (u.p.d.o.f.) shall not apply to write-offs for the use of a passenger car if that car has been surrendered by the taxable person for use under the lease agreement in question.

Under Article 17a(1) the Corporate Income Tax Act (Article 23a(1) u.p.d.o.f.), leases, leases or other similar contracts, and the surrender of the use on the basis of such a contract is subject to the activities of the taxable person.

This means that the taxable person who purchased a passenger car with a value exceeding 150,000 PLN – where such a car is put into service for consideration to another operator, e.g.

under a lease agreement, indicated under Article 17a(1) the Corporate Income Tax Act – does not apply the restriction resulting from Article 16(1)(4) the Corporate Income Tax Act in respect of credit for the tax deductions made on such a car.

It should also be noted that the new Article 16(1)(4) point (a) the Corporate Income Tax Act (Article 23(1)(4) point (a) (u.p.d.o.f.) may be a trap for taxpayers, as it provides for a special transitional solution. Name, according to Article 15(1) amending legislation, provisions Article 16(1)(4) point (a) the Corporate Income Tax Act (Article 23(1)(4) point (a) u.p.d.o.f., as amended by the Amending Act, shall apply to electric vehicles within the meaning of Article 2(12) Electromobility Act, put into service from the day following the announcement of a positive decision by the European Commission on the compatibility of the State aid provided for in those provisions with the common market or on the conclusion by the European Commission that these provisions do not constitute State aid.

Under Article 15(2) Whereas the amending act established that by the date in question under Article 15(1) Amending Act, as regards an electric passenger car within the meaning of Article 2(12) Electromobility Act, the limits applicable to cars other than electric vehicles set out in the regulations u.p.d.o.f.

and the Corporate Income Tax Act, in the version given by the amending Act (i.e. limit 150,000 PLN).

Therefore, the limit on depreciation deductions to be included in the tax costs specific to electric cars (225,000 PLN) may be used only for electric vehicles put into use from the day following the date of notification of the decision to the European Commission.

Note

In the case of a passenger car whose initial value exceeds the equivalent of a specified limit under Article 16(1)(4) the Corporate Income Tax Act (Article 23(1)(4) u.p.d.o.f.), the cost of obtaining revenue does not include that part of the depreciation deductions made, which is made from the value of the car exceeding the limit specified by these provisions.

The question may be raised as to the effect of the amendment Article 16(1)(4) the Corporate Income Tax Act (Article 23(1)(4) u.p.d.o.f.) for those taxpayers who on the date of its entry into force (1 January 2019) were in the process of tax depreciation of the passenger car.

The amending act does not provide for any transitional solution that would apply to passenger cars entered into the register of fixed assets before 1 January 2019 In particular, no provision of the amending act indicates that the increased limits on depreciation of passenger cars are not applicable to those passenger cars, fixed assets which were entered into the register of fixed assets before the date of entry into force of the revised provisions.

Consequently, it is appropriate to state that the revised regulations Article 16(1)(4) the Corporate Income Tax Act (Article 23(1)(4) (u.p.d.o.f.) shall also apply to those passenger cars which, as fixed assets, have been entered into the accounts of fixed assets to 31 December 2018

Example

The entrepreneur bought 20 December 2017 new passenger car for 120,000 PLN (the purchase price is the initial value of the fixed asset) and entered it in the accounts on the same day. From the initial value of the measure indicated In 2018 linear depreciation at depreciation rate 20%. That means that In 2018 the taxpayer made depreciation write-downs for the total amount 24,000 PLN, in view of the set limit (Article 23(1)(4) point (b) u.p.d.o.f.) made In 2018 Amortisation write-offs were subject to a reduction in the tax burden of the cost of obtaining revenue. Accordingly to the tax costs, the total amount has been calculated 16,790 PLN title made In 2018 depreciation deductions from the measure in question. As the average euro rate per 20 December 2017 was 4.1975 PLN, is:

• 1) the amount of depreciation to be charged for the cost of obtaining income was 83,950 PLN (which results from the calculation of: 20,000 EUR × 4.1975),
• 2) the annual value of depreciation premiums to be included in the cost of obtaining income was 16,790 PLN (which results from the calculation of: 83,950 PLN × 20%).

In relation to the introduced 1 January 2019 change of regulation Article 23(1)(4) u.p.d.o.f. taxpayer In 2019 may include the total value of depreciation written down from 1 January 2019?

With regard to the issue presented, it should be noted again that the regulations of the amending law, introducing amendments Article 23(1)(4) u.p.d.o.f., do not provide for any transitional provision for the exclusion of its use in respect of passenger cars which have been entered in the accounts of fixed assets to 31 December 2018 It is therefore logical to conclude that the limit of depreciation to be included in the tax costs 150,000 PLN, current content Article 23(1)(4) point (b) u.p.d.o.f., also applies to those passenger cars which were accepted for use before 1 January 2019 In my opinion, the taxpayer in making further depreciation write-offs, and therefore from 1 January 2019, will be able to charge their full value to tax costs, since, as the facts show, they will be made from an initial value lower than the defined value under Article 23(1)(4) point (b) u.p.d.o.f.

as applicable from 1 January 2019 However, there is no basis for the retroactive adjustment of depreciation values made to 31 December 2018 in connection with the increase in the value of depreciation deductions to be included in tax costs.

Thus, in my view, if tax payers benefit from the increase in this limit, who, at the date of entry into force of the revised regulation, will benefit Article 23(1)(4) u.p.d.o.f.

(Article 16(1)(4) the Corporate Income Tax Act) are included in the depreciation process of the passenger car (only in relation to other depreciation deductions from 1 January 2019), there is no basis for the adjustment of depreciation deductions included in tax costs made to 31 December 2018

1.3.2.4. Financing the purchase of a passenger car and tax costs

Subject to Article 16(1)(48) the Corporate Income Tax Act (Article 23(1)(45) (u.p.d.o.f.) tax revenue costs shall not include write-downs for the consumption of fixed assets and WNiP made in accordance with the rules laid down under Article 16a-16m the Corporate Income Tax Act (Article 22a-22o (u.p.d.o.f.), from that part of their value which corresponds to the expenditure incurred on the acquisition or production in their own right of defence of those resources or of the General Court, deducted from the tax base by income tax or reimbursed to the taxable person in any form. This rule will apply to write offs on fixed assets acquired, for example, on the basis of grants, subsidies or other forms of co-financing received for this purpose.

1.3.3. Insurance costs of the passenger car

The use of a passenger car involves the need to pay for various types of insurance. They are divided into those which are compulsory (OC) and those which are voluntary (AC, assistance or NNW). A natural tax consequence of the (often large) cost of insurance of a passenger car is the need to recognise the tax costs of obtaining revenue from such charges. In this respect, the general principles resulting from Article 15(1) the Corporate Income Tax Act (Article 22(1) u.p.d.o.f.), which means that the cumulative fulfilment of the following conditions is necessary for crediting the insurance costs incurred with the tax burden of the costs of obtaining revenue:

• 1) there is a link between the cost incurred and the revenue obtained or the behaviour or safeguarding of the revenue source,
• 2) the cost is not excluded from the tax costs of obtaining revenue on the basis of Article 16 the Corporate Income Tax Act (Article 23 u.p.d.o.f.),
• 3) the cost has been properly documented.

Yet to 31 December 2018 specific regulations with Article 16(1)(49) the Corporate Income Tax Act (Article 23(1)(47) (u.p.d.o.f.) determined that the cost of obtaining revenues does not constitute a contribution to the insurance of a passenger car in excess of the proportion fixed in such proportion as the equivalent remains 20,000 EUR, converted into gold at the average rate of euro, announced by the NBP on the date of conclusion of the insurance agreement in the value of the car accepted for insurance purposes.

From 1 January 2019 These regulations have changed significantly as a result of the amendment made by the amending Act.

As currently in force Article 16(1)(49) the Corporate Income Tax Act (Article 23(1)(47) (u.p.d.o.f.) shall not be included in the tax cost of obtaining income for passenger car insurance contributions in excess of the proportion fixed in such proportion as the amount 150,000 PLN remains to the value of the car accepted for insurance purposes.

This increased the limit of contributions to the insurance of a passenger car, which are included in tax costs.

By literally analyzing the content Article 16(1)(49) the Corporate Income Tax Act (Article 23(1)(47) (u.p.d.o.f.) it should be noted that, as in the previous state of the law, the current limitation on the crediting of vehicle insurance contributions (car) refers to those contributions whose amount depends on the value of the vehicle adopted for the purposes of insurance.

In practice, this is about AC insurance. This view is confirmed in the interpretation of the individual tax law of the Director of IS in Bydgoszcz with 18 March 2016, which, although based on the previous legal situation, remains valid also in the light of the present, i.e. applicable from 1 January 2019 sound Article 23(1)(47) u.p.d.o.f.

(Article 16(1)(49) the Corporate Income Tax Act).

Individual interpretation of the Director of the Tax Chamber in Bydgoszcz with 18 March 2016 7

As provided for in that provision (Article 16(1)(49) the Corporate Income Tax Act and Article 23(1)(47) (u.p.d.o.f.) the limitation of contributions to the insurance of a passenger car, which may be included in the cost of obtaining revenue, applies only to contributions whose amount depends on the value of the car (AC).

This provision does not explicitly specify which type of insurance is involved (OC, AC, NNW), but it should be considered that it relates only to AC insurance, since the value of the car accepted for insurance purposes is important for the determination of the limit referred to in those provisions, and this is accepted only for AC.

For OC and NNW insurance, the value of the car is not relevant.

The way in which the insurance costs incurred are credited with the tax burden of obtaining revenue is described in the following example.

Example

Tax payer 31 July 2018 concluded for one year (from 1 August 2018 to 31 July 2019) car insurance agreement. The accepted value of the insured passenger car for AC insurance purposes is set at 140,000 PLN. The annual AC contribution for this insurance is set at 3,000 PLN.

In 2019 the insurance will be renewed for the following year and the value of the car for insurance purposes will be set at the amount 130,000 PLN. AC contribution for the following year (from 1 August 2019 to 31 July 2020) is 2,900 PLN.

Because the average euro rate announced by NBP with 31 July 2018 (the date of conclusion of the insurance contract) was 4.2779 PLN, In 2018 limit allowing the AC contribution to be charged to the cost of obtaining revenue resulting from Article 16(1)(49) the Corporate Income Tax Act, was 1,833.39 PLN.

It was established on the basis of the proportion of the amount 85,558 PLN (20,000 EUR × 4.2779 PLN) in the value of the vehicle accepted for insurance purposes.

In turn, after the conclusion of the AC insurance agreement, the vehicle indicated In 2019 (for the period from 1 August 2019 to 31 July 2020) The taxpayer will be able to charge the full amount of the contribution to this insurance in the tax burden of the cost of obtaining revenue.

The value of the passenger car accepted for insurance purposes (130,000 PLN) does not exceed the limit set under Article 16(1)(49) the Corporate Income Tax Act (150,000 PLN), and therefore there is no basis for applying a proportional reduction in the value of the premium to be included in the cost of obtaining revenue.

1.3.4. Costs related to the day-to-day operation of a passenger car

As long as it's not over. 2018 regulations and the Corporate Income Tax Act did not provide for specific arrangements for the cost of the day-to-day operation of a passenger car qualified as a durable medium of the taxpayer, starting from 1 January 2019, The amendment introduced by the Amending Act made a major change in this respect.

Namely, according to the introduced regulation Article 16(1)(51) the Corporate Income Tax Act, not considered as tax costs 25% expenditure incurred (subject to Article 16(1)(30) the Corporate Income Tax Act), for the costs of using a passenger car for business purposes (e.g.

fuel, consumables, parts, current repairs or repairs of a passenger car), if the passenger car is also used for purposes not related to the economic activity of the taxable person. A similar solution is provided for by disposition Article 23(1)(46a) u.p.d.o.f., introduced by the amending Act.

According to it, it is not considered to be tax revenue costs 25% expenditure incurred (subject to Article 23(1)(36) (u.p.d.o.f.), for the cost of using a passenger car, other than specified under Article 23(1)(46) u.p.d.o.f., for the purposes of the taxable person's business activity, if the passenger car is also used for purposes not related to the economic activity of the taxable person.

It should be noted that the scope of the introduced regulation excludes situations for which separate solutions are provided for limiting the burden of the cost of obtaining revenues from the use of a passenger car. These are the cases provided for in the following provisions:

• 1) Article 16(1)(30) the Corporate Income Tax Act (Article 23(1)(36) u.p.d.o.f.) – a solution laying down rules for the inclusion in the tax costs of expenses incurred to employees for the use of cars by them for the purposes of the taxpayer,
• 2) Article 23(1)(46) u.p.d.o.f. — a solution which is appropriate to the costs incurred for the use, which is the property of an economic taxable person, of a passenger car which is not an asset.

Analysis in force from 1 January 2019 regulation Article 16(1)(51) the Corporate Income Tax Act (Article 23(1)(46a) (u.p.d.o.f.) requires criteria to be indicated for the determination of the use of a passenger car for purposes not related to the economic activity of the taxable person. In line with the new solutions:

1. Article 16(5f) the Corporate Income Tax Act (Article 23(1)(5f) (u.p.d.o.f.) where the taxable person does not keep the records in question under Article 86a(4) the VAT Act, the passenger car is also considered to be used for purposes not related to the economic activity of the taxable person,
2. Article 16(5g) the Corporate Income Tax Act (Article 23(1)(5g) u.p.d.o.f.) – recipe Article 16(5f) the Corporate Income Tax Act (Article 23(1)(5f) (u.p.d.o.f.) shall not apply where the taxable person is subject to the provisions the VAT Act is not obliged to keep such records, except where the absence of such an obligation arises from Article 86a(5)(2) point (a) the VAT Act,
3. Article 16(5h) the Corporate Income Tax Act (Article 23(1)(5h) (u.p.d.o.f.) where it is established that the taxpayer, contrary to the facts, did not apply a restriction resulting from Article 16(1)(51) the Corporate Income Tax Act (Article 23(1)(46a) (u.p.d.o.f.), that provision shall apply from the date on which the taxable person starts using the passenger car concerned.

In accordance with the rules laid down, where the taxable person keeps records of the conduct of a passenger car for VAT purposes (referred to above) under Article 86a(4) Act on 11 March 2004 on tax on goods and services 8 (Next: the VAT Act), legal fiction is adopted, resulting in Article 16(1)(51) the Corporate Income Tax Act (Article 23(1)(46a) u.p.d.o.f.) – the vehicle is considered to be used exclusively for business purposes and therefore no limitation on the credit to the tax costs of operating expenditure resulting from this provision applies.

A contrario with a lack of record keeping for purposes the VAT Act it is considered that the taxable person uses a passenger car for mixed purposes (subject to the exemptions indicated) under Article 16(5g) the Corporate Income Tax Act and Article 23(5g) u.p.d.o.f.), and thus 25% the operating costs of the passenger car shall be excluded from credit for the tax costs of obtaining revenue.

In addition, the standard Article 16(5a) the Corporate Income Tax Act (Article 23(5a) (u.p.d.o.f.) establishes that the expenditure in question has been incurred under Article 16(1)(51) the Corporate Income Tax Act (Article 23(1)(46)(46a) the amount referred to; under Article 16(1)(49a) the Corporate Income Tax Act (Article 23(1)(47a) (u.p.d.o.f.) shall also cover VAT which, in accordance with the VAT rules, does not constitute input tax and the VAT charged, in the part where the taxable person is not entitled to a reduction in the amount or reimbursement of the VAT difference.

Example

An entrepreneur engaged in non-agricultural business carried out 16 April 2019 This appropriation is intended to cover the following expenditure: 1,230 PLN (1,000 PLN + 230 PLN VAT).

The entrepreneur is an active VAT taxable person who does not keep track of the vehicle for the purposes of VAT in question under Article 86a(4) the VAT Act In connection with the performance of VAT-taxed activities only, it has the right, according to Article 86a(1)(1) the VAT Act, to deduct the input tax for the expenditure indicated, documented by the invoice received, 50% the amount of tax resulting from the invoice received from the vehicle mechanics plant (i.e.

115 PLN, which results from the calculation of: 230 PLN × 50%). Driving Article 23(1)(46a) u.p.d.o.f. in conjunction with Article 23(5a)(5f) u.p.d.o.f., it should be noted that the tax costs for obtaining revenue in the situation described above cannot be classified as 25% expenditure incurred for the use of a passenger car.

Since the taxable person does not keep records of the course required for VAT purposes Article 86a(4) the VAT Act, it is assumed that on the ground the VAT Act the vehicle is used for mixed purposes.

As a result, in relation to Article 23(5f) u.p.d.o.f., the indicated passenger car is also considered to be used for purposes not related to the economic activity of the taxable person, which leads to a reasonable application of the proposed solution under Article 23(1)(46a) u.p.d.o.f.

Because according to Article 23(5a) expenditure incurred (indicated) under Article 23(1)(46a) (u.p.d.o.f.) shall also cover VAT, which, in accordance with the VAT rules, does not constitute input tax, and the VAT charged, in the part in which the taxable person is not entitled to a reduction in the amount or reimbursement of the VAT difference, a solution resulting from the provision of VAT, Article 23(1)(46a) u.p.d.o.f.

also includes non- deducted value 50% the amount of VAT shown on the invoice received from the vehicle mechanics plant.

Thus, the tax revenue costs will be excluded from the value 278.75 PLN (which results from the calculation of: 1,000 PLN × 25% + 115 PLN × 25%). Thus, following Article 86a(1)(1) the VAT Act and Article 23(1)(46a) u.p.d.o.f., the taxable person in connection with the acquisition of the services indicated: 1) deduction 50% amount of input tax the VAT Act, i.e. amount 115 PLN, 2) will be included in the tax costs of the amount 836.25 PLN (1,115 PLN – 278.75 PLN).

According to Article 16(5g) the Corporate Income Tax Act (Article 23(1)(5g) (u.p.d.o.f.) recipe Article 16(5f) the Corporate Income Tax Act (Article 23(5f) (u.p.d.o.f.) shall not apply where the taxable person is subject to the provisions the VAT Act is not obliged to keep such records, except where the absence of such an obligation arises from Article 86a(5)(2) point (a) the VAT Act In both areas the Corporate Income Tax Act, and u.p.d.o.f.

therefore raises an important question about the principles of tax recognition of the cost of obtaining revenue in the context of regulation Article 16(1)(51) the Corporate Income Tax Act (Article 23(1)(46a) u.p.d.o.f.), in connection with the use (exploitation) of a passenger car constituting a permanent measure by those taxable persons who, on the ground the VAT Act are not required to keep track record of the vehicle due to the lack of entitlement to deduct input tax (e.g.

because they benefit from the VAT exemption in connection with the turnover achieved – the exemption indicated under Article 113(1) and 9 the VAT Act). Subject to Article 16(5g) the Corporate Income Tax Act (Article 23(5g) (u.p.d.o.f.) in such a situation, the proposed solution shall not apply.

16 section 5f the Corporate Income Tax Act (Article 23(5f) (u.p.d.o.f.) and therefore the lack of record keeping for VAT purposes does not constitute a recognition under the Income Tax Act that a passenger car is also used for purposes not related to the economic activity of the taxable person.

In such a case, where the taxable person actually uses a passenger car solely for business purposes and at the same time according to Article 86a(5)(2) point (a) the VAT Act does not keep track record of the vehicle, has the right to charge the tax burden of the cost of obtaining revenue 100% the value of the costs incurred in the operation of the passenger car.

This view is based on the interpretation of the individual tax law of the Director of National Tax Information from 8 April 2019

Individual interpretation of the Director of KIS from 8 April 2019 9

The applicant’s expenditure incurred on the costs of using a passenger car lent by her parents for purposes solely related to the business activity will be possible on the basis of Article 22(1) u.p.d.o.f. score in 100% to the cost of obtaining revenue, since it is not obliged to keep track record of the vehicle, according to Article 86a(5)(2) point (a) the VAT Act

2. Use of instructions

The instruction shall be subject to the application by taxable persons of:

• 1) tax depreciation of passenger cars regarded as fixed assets,
• 2) bear the costs of using passenger cars,
• 3) bear the costs of insurance of passenger cars,
• 4) the determination of income/losses due to the paid disposal of the passenger car.
• 2.1. Operators applying the instructions

The instructions are given by corporate tax payers and individuals tax payers.

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1 i.e. Journal of Laws of 2019, item 865.

2 i.e. Journal of Laws of 2019, item 1387 as amended

3 This issue is discussed in a separate material in the book “Books and Tax Instructions 2019” + CD, C.H. Beck Publishing House, Warsaw 2019; https://www.ksiegarnia.beck.pl/18052-instrukcje-ksiegowe-i-podatkowe-2019-plyta-cd-artur-holda Cf. also D. Kuszewski, Changes in the taxation of passenger cars used by entrepreneurs, monthly magazine "Legal and Tax Advice - RB Newsletter, No. 4 (9) April 2019, p. 31-37.

4 Journal of Laws of 2017, item 1448.

5 Journal of Laws of 2018, item 2159.

6 Journal of Laws of 2019, item 1124.

7 reference no. ITPB3/4511-1/16/PS, Legalis.

8 i.e. Journal of Laws of 2018, item 2174.

9 reference no. 0113-KDIPT2-1.4011.72.2019.2.AP, Legalis.

10 Journal of Laws of 2018, item 2159.