Lease and purchase of vehicles

From 1 January 2019, as a result of the entry into force of the Act of 23 October 2018 amending the Personal Income Tax Act, the Corporate Income Tax Act and certain other acts 1 (Further: z.u.p.d.o.f.o.p.18), There has been a major change in the rules for charging to the cost of obtaining the revenue of expenditure related to the acquisition and use of passenger cars.

The main purpose of the amendments was to limit the possibility of using leasing contracts for the purposes of crediting the full value of the car with the cost of obtaining revenue, as well as the introduction of a limit on the amount to which the taxable person may in general include expenses related to the purchase of the car with the added costs.

The author, discussing these provisions, presents the position of tax authorities and administrative courts.

1. Comment

1.1. Vehicles subject to restrictions

As a rule, the change (under the power of zu.p.d.o.f.o.p.18) the range of types of cars affected by the restrictions provided for in the Act of 15 February 1992 on corporate income tax 2 (Next: the Corporate Income Tax Act) and the Act of 26 July 1991 on personal income tax 3 (Further: u.p.d.o.f.). The amendments relate only to passenger cars, which, however, are defined very widely under these tax laws. According to Article 4a(9a) the Corporate Income Tax Act (Article 5a(19a) (u.p.d.o.f.) a passenger car is a motor vehicle within the meaning of traffic regulations with a maximum permissible mass not exceeding 3.5 tonnes, designed to carry no more than 9 persons including the driver. This part of the definition already indicates that:

• 1) whether the vehicle in the light of its approval is a heavy weight or a passenger — it is only important that it is a vehicle with a maximum permissible mass not exceeding 3.5 tonnes,
• 2) A vehicle under road traffic law are also single-track, so provided for in the Corporate Income Tax Act and u.p.d.o.f. restrictions also apply to motorcycles and motorcycles.

However, certain motor vehicles, including:

• 1) vehicles having one a row of seats, separated from the part intended for carrying loads by a wall or a permanent bulkhead, including multi-purpose vehicle type vehicles, van or open part intended for carrying loads (pick-up);
• 2) vehicles with a driver’s cab and bodywork intended for one row of seats to carry loads as structurally separate components of the vehicle;

1. Special vehicles, where it is apparent from documents issued in accordance with traffic regulations that the vehicle is a special vehicle, the exemption shall apply only to vehicles, such as: electric/welding unit, drilling, excavator, excavator-speaker, charger, maintenance/assembly lift, crane.

The definition of passenger cars was also excluded from the scope of the rules on motor vehicles Article 86a(16) Act on 11 March 2004 on tax on goods and services 4 (Next: the VAT Act), including funeral special vehicles and type A and B bankers meeting certain criteria. Definition of passenger cars provided for in regulations u.p.d.o.f.

and the Corporate Income Tax Act is fully consistent with the definition of motor vehicles contained in the VAT Act Similar methods are also used to confirm vehicle status on the ground of all third set:

1. meeting requirements for motor vehicles with one row of seats (vans, multi-tasking, pick-ups and vehicles with cabin and freight bodywork as separate structural elements) shall be confirmed on the basis of an additional technical examination carried out by the district vehicle control station and issued by that station a certificate and registration certificate of a vehicle with an endorsement of compliance with those requirements;
2. documents issued in accordance with traffic regulations are required for special vehicles.

With regard to the role of the additional technical examinations indicated above, it is worth recalling the NSA judgment of 10 October 2019 5 , where the court has confirmed that failure to carry out the technical examination of the vehicle does not result in the loss of the right to fully deduct VAT from the leasing invoices in the event that the vehicle has design features entitling for full deduction.

Even if the taxable person does not have a technical examination of the vehicle or an appropriate entry in the registration certificate, the tax authorities should carry out an evidence investigation and determine whether the vehicle used by the taxable person has those design characteristics, as defined by the legislator and entitling full VAT deduction.

This judgment should also apply to income taxes. It is also extremely important because the judgments of the provincial administrative courts issued to date, but also after the NSA judgment, confirmed the contrary.[6].

The NSA ruling does not, however, mean that the taxable person does not have to demonstrate that the used car has actually met the requirements for a full VAT deduction, and now, both for a full credit of depreciation, rental, lease or leasing, and for the operation of the vehicle, i.e.

had characteristics one from the vehicles indicated above, for the moment when VAT was deducted or expenditure was included in the cost of obtaining revenue.

If the taxable person has carried out an additional technical examination and has obtained a certificate from the vehicle control station that the vehicle complies with the requirements laid down in the legislation the VAT Act for full VAT deduction, this certificate should also be sufficient for income tax purposes.

It would be unreasonable to oppose the position, since it confirms compliance with the criteria set out in the VAT Act in the above, it automatically means that the vehicle meets the requirements for income taxes, the range of vehicles with a maximum permissible mass up to 3.5 tonnes not subject to the restrictions provided for in the VAT Act, the Corporate Income Tax Act and u.p.d.o.f.

is identical.

As regards the inclusion in the cost of obtaining depreciation revenues or leasing payments for used cars, it should also be pointed out that, unlike the costs of operating passenger cars, the issue of keeping track record of the vehicle referred to in the VAT regulations remains irrelevant. The restrictions described below apply both to the taxable person who, in respect of the vehicle concerned, keeps a record of the course for VAT purposes and where such record is not kept (or does not have to be kept due to, for example, the use of the car for hire).

1.2. Acquisition and depreciation of a passenger car

Amendment of the provision Article 16(1)(4) the Corporate Income Tax Act (and by analogy Article 23(1)(4) u.p.d.o.f.) – performed pursuant to z.u.p.d.o.f.o.p.18 – are definitely beneficial to taxpayers.

Before 1 January 2019 the taxable person, when purchasing the car and entering it into fixed assets, could have included in the cost of obtaining revenue depreciation only in the amount corresponding to the proportion of the equivalent 20,000 EUR to the initial value of the vehicle.

Therefore, the purchase of a car with an initial value exceeding ok. 85,000 PLN it required a proportionate determination of that part of the depreciation write-down which was included in the cost of obtaining revenue.

As a result of changes in 1 January 2019 this limit has been increased to 150,000 PLN, with the same limit as in the case of the remaining limit 2018 The depreciation credit included in the tax costs should be determined on the basis of a proportion 150,000 PLN to the initial value of the vehicle.

Therefore, if the initial value of the car does not exceed that amount, the entire depreciation allowance may be included in the cost of obtaining revenue. However, if the initial value of the car is higher, for example, 250,000 PLN, then the taxpayer is entitled to credit for the cost of obtaining revenue 60% A depreciation copy.

The introduction of a new higher limit was not accompanied by virtually any transitional provisions, as a result it should be considered to apply to passenger cars entered in the register both before and after 1 January 2019 So whether we're talking about a car already used by the taxpayer before 1 January 2019, or a car which will only be entered in the register after that date, in both cases for the determination of the amount of the depreciation allowance included in the cost of obtaining revenue from January 2019 be guided by a new limit equal to 150,000 PLN.

This is confirmed by the Director of the CIS's tax interpretations, including interpretation from 30 April 2019 7 , according to which the revised provisions which set a new limit of 150,000 PLN for passenger cars, do not restrict the right to apply this limit from 1 January 2019 the reference to fixed assets entered in the records before the date of entry into force of the amended provisions. Therefore, if the initial value of the vehicle is lower than indicated 150,000 PLN – depreciation written down by taxable persons from 2019 are fully cost-effective.

Example

In 2017 the taxpayer purchased a passenger car of gross value 135,300 PLN, When he acquired it, he deducted 50% VAT amount 12,650 PLN. The taxpayer introduced the car to the inventory of fixed assets at initial value 122,650 PLN (Gross value — 50% VAT).

The taxpayer used a linear depreciation method at a rate 20%, As a result, the amount of the depreciation allowance to be included in the cost of obtaining revenue was determined using the equivalent ratio 20,000 EUR (e.g. 85,000 PLN) to the initial car (122,650 PLN).

Given that the initial value of the car does not exceed the amount 150,000 PLN, Amortisation copy for January 2019 will be the full amount of tax.

This interpretation is also confirmed by the MF in the tax explanations issued 9 April 2020 8 (hereafter referred to as the Explanations), on the costs of using passenger cars in business. It points to the obvious lack of retroactive application of new, increased limits to cars which have already been fully depreciated by the taxpayer before 1 January 2019: „New limits (150,000 PLN and 225,000 PLN) do not apply to write-offs for the use of passenger cars fully depreciated before 1 January 2019 Regulations of.u.p.d.o.f.o.p.18 do not entitle to, for example, adjustments to depreciation accounts for the period before 1 January 2019 following the entry into force of the new limits’ 9 .

Higher depreciation limit, i.e. 225,000 PLN, applies to passenger cars that are an electric vehicle within the meaning of Article 2(12) Electromobility and Alternative Fuels Act 10 (Further: u.e.p.a.).

However, the possibility to benefit from the increased limit was dependent on the announcement of a decision by the European Commission (EC) confirming that the differentiation of the limits applied was public aid compatible with the common market, or the Commission's finding that it did not constitute State aid.

The Commission’s letter on this case was received by the Ministry of Energy 18 December 2018 It confirms that the proposed differentiation seems reasonable and fits into the logic of environmental measures and does not violate EU state aid rules.

On this basis, the MF confirms in the Explanations that from the date of the announcement of the EC position, i.e. from 18 December 2018 to 31 December 2018, for electric cars, there was a limit on depreciation charges of 30,000 EUR, and from 1 January 2019 a limit of 225,000 PLN.

Important

For electric cars, particular attention should be paid to transitional provisions. They entail the possibility of applying increased depreciation limits on the date on which the electric car is put into service.

If the electric car has been put into use to 18 December 2018 including lower limits applicable to other passenger cars, i.e.:

• 1) 20,000 EUR – for write-downs to 31 December 2018,
• 2) 150,000 PLN – for write-offs from 1 January 2019

Only for electric cars put into use by 19 December 2018 increased limits shall apply:

• 1) 30,000 EUR – period to 31 December 2018,
• 2) 225,000 PLN – from 1 January 2019

It should also be stressed that the increased tax depreciation limit applies from January 2019 to those taxable persons whose tax year coincides with the calendar year.

According to Article 13 z.u.p.d.o.f.o.p.18 corporate tax payers whose tax year is different from the calendar year and started before 1 January 2019 and will end after 31 December 2018, apply until the end of the tax year adopted by them Article 2 the Corporate Income Tax Act in the version to date.

Thus, if the year of the taxpayer has begun 1 October 2018 and continued to 30 September 2019, new car legislation, including new limits on depreciation, should only apply from 1 October 2019

In addition to increasing the limit on the amounts of depreciation deductions included in the cost of obtaining revenue, a similar limit for lessees and tenants passenger cars, as mentioned below.

The introduction of such a limit for both depreciation write-offs and lease instalments (rental leases) would mean, in the case of more expensive cars, double the limits on both sides of the lease and lease contracts.

Therefore, a specific solution was envisaged for depreciation (Article 16(5b) the Corporate Income Tax Act and Article 23(5b) (u.p.d.o.f.), according to which the limit provided for for depreciation write-offs does not apply to write-offs for the use of a passenger car if that car has been surrendered by the taxable person for use on the basis of a lease, lease, lease or other similar contract, and the surrender of such use on the basis of such a contract is the subject of the taxable person's business.

Similarly to the provisions increasing the limit of depreciation, no transitional provisions were also accompanied by that provision.

As a result, a new rule that does not apply the limitation of depreciation for cars intended to provide paid rental, lease or lease services was also covered by rental and leasing companies' cars for these purposes and entered in the records before 1 January 2019

However, it should be stressed that the possibility to benefit from this exemption concerns a particular car intended by the purchaser to be used for payment on the basis of the contracts in question and, at the same time, the taxable person should actually carry out that activity.

The Minister of Finance confirms this fact in the Explanations, indicating that the activity of placing vehicles for free use must lie within the basic activity of the taxpayer. Therefore, in the assessment of the MF, it is necessary to determine the type and subject matter of the business activity carried out by the taxpayer.

The MF considers the taxpayer's registration documents, as well as the provisions resulting from the company's contract or its statutes and the codes of the Polish Classification of Activities (e.g. code) as helpful in this respect (e.g. 77. 11 .Z — ‘renting and leasing of passenger cars and vans’).

However, as the MF reserves, the data resulting from the KRS, the contract or the taxpayer's statutes do not prejudge the possibility of using these rules which exclude restrictions – it will be crucial to have a real reality each time, and therefore to have a real business in a given area.

It is also appropriate to indicate the limitations introduced in terms of the possibility to include in the cost of obtaining revenue from the unmortised value of the cars used. As regards passenger cars entered into the register of fixed assets of the taxpayer from 1 January 2019 it is foreseen that the costs of obtaining revenue from the sale of such a car will be expenditure on acquiring it in part not exceeding the amount 150,000 PLN (225,000 PLN for electric cars), after deduction of this expenditure by the sum of depreciation premiums for the consumption of that car included in the cost of obtaining revenue.

Example

After 1 January 2019 the taxpayer purchased and entered in the register of fixed assets a car of value 360,000 PLN (net value + VAT not deducted). The taxpayer absorbs the purchased car at the rate 20% to 4 years, i.e. rod 72,000 PLN annual (total 288,000 PLN). After that, the entrepreneur sells the car for 120,000 PLN.

The cost of selling the car will be the difference between the new tax depreciation limit, i.e. 150,000 PLN, and the value of the depreciation deductions included by the taxpayer in the cost of obtaining revenue.

So, if by 4 years of use of the car, the taxpayer will include in the cost of obtaining revenue depreciation in the total amount 120,000 PLN (41.66% A depreciation copy), will be entitled to deduct only when selling the car 30,000 PLN the cost.

Selling a car after 4 years for the amount 120,000 PLN So it's going to show a revenue of 90,000 PLN (income equal to 120,000 PLN minus costs, i.e. 30,000 PLN).

In order to avoid duplication of restrictions on the part of entities which purchase passenger cars are treated as fixed assets rendered on lease or lease, the principle that the above restriction does not apply when determining the cost of obtaining the proceeds from the sale of a passenger car which has previously been paid by the taxpayer for use under a lease contract, lease contract, lease contract or other similar contract, and the surrender of such use on the basis of such a contract is the subject of the taxable person's business.

In principle, this restriction should not apply to cars used for rental or leasing by companies operating in this area.

Similarly to the exclusion of the limit for depreciation write-downs, the activity of the taxpayer is also relevant in this situation, and its registration documents, the company’s contract or its statutes, indicating the exercise of business in this respect, can be helpful but not decisive.

1.3. Leasing and car rental from January 2019

Amendments to the provisions of the u.p.d.o.f. and the Corporate Income Tax Act from 1 January 2019 (by the power of s.u.p.d.o.f.o.p.18) They also aimed at aligning the tax effects of leasing, renting and leasing passenger cars with their purchase.

According to the new Article 16(1)(49a) the Corporate Income Tax Act (by analogy Article 23(1)(47a) (u.p.d.o.f.) the costs of obtaining revenue are not included in the fees for the passenger car concerned resulting from the lease agreement in question under Article 17a(1) the Corporate Income Tax Act, leases, leases or other similar contracts, in excess of those fixed in such proportion as the amount 150,000 PLN remains to the value of the passenger car covered by that contract.

It should also be noted that these fees will not include the contribution to passenger car insurance (to which a separate provision applies).

Unless it is doubtful that the taxpayer uses a passenger car on the basis of a lease agreement, the insurance premiums are paid on the basis of his insurance policy, so that the insurance contract concluded with the insurance undertaking by leasing provider, which subsequently imposes on the taxpayer the cost of insurance premiums, is the subject of divergent positions by tax authorities and administrative courts.

In the assessment of tax authorities lessee should each time see the cost of the contribution initially paid by leasing provider as an insurer, as bearing the cost of car insurance.

In effect, although lessee is not a party to the insurance contract (as it has entered into the contract) leasing provider), to the costs of insurance premiums incurred, it should apply the restrictions specific to insurance.

An example may be an individual interpretation of 27 May 2019 issued by the Director of KIS[11], where the authority referred to third options for the settlement of insurance premiums, i.e.:

• 1) leasing provider conclude an insurance contract and then charge the applicant at the cost of insurance on the basis of an invoice, where the amount of the insurance premium is calculated in the lease payment,
• 2) leasing provider conclude an insurance contract and then charge the taxpayer at the cost of the insurance on the basis of an invoice where the insurance premium is included on the invoice but will be separated in a position other than a leasing payment,
• 3) lessee it itself concludes an insurance contract with the insurer and pays the insurance premium on the basis of the policy received.

In the assessment of the Authority in all of the above cases, the calculation of insurance premiums is irrelevant and the restriction applicable to these premiums applies to all the options described above (and thus to the part of the insurance premium included in the leasing payment).

However, the administrative courts have a different position – they consistently say that since it leasing provider includes an insurance contract, it is solely related to the restrictions applicable to insurance premiums[12].

The restriction in question applies to charges arising not only from car leasing contracts but also from rental, lease and any other similar contract under which the taxable person uses the car or is entitled to use it. It is a frequent mistake for taxpayers to restrict the application of this restriction only to instalments resulting from leasing contracts. The same limit for electric cars is 225,000 PLN.

It should also be pointed out that both this provision on limiting the possibility of crediting leasing charges to revenue costs (Article 16(1)(49a) the Corporate Income Tax Act), as well as further rules relating to it are controversial.

First of all, point to Article 16(5a) the Corporate Income Tax Act (and Article 23(5a) (u.p.d.o.f.), according to which the amount referred to in that provision also includes VAT which is not deductible under VAT rules.

The construction itself raises serious doubts, as the only amount referred to in the above regulations is 150,000 PLN, However, it is difficult to tell which VAT would be involved.

The taxable person does not purchase the car, but only uses it under a lease, lease or lease contract, the only VAT that can be deducted is VAT resulting from leases or rents.

Furthermore, as can be seen from the position presented by the MF, if the taxable person is entitled to deduct from the expenditure related to the car in question 50% VAT is the amount 150,000 PLN should be treated as an amount comprising 134,529.15 PLN net amounts and 15,470.85 PLN VAT amounts.

As a result, with a net leasing instalment cost of 3,500 PLN for a car of a value 200,000 PLN, The taxpayer would calculate the part of the instalment included in the cost of obtaining revenue as: 3,500 PLN × 134,529.15 PLN÷ 200,000 PLN. Thus, the tax costs would amount to 2,354.26 PLN.

However, in the author's opinion, if the provision states that the amount indicated under Article 16(1)(49a) the Corporate Income Tax Act (Article 23(1)(47a) (u.p.d.o.f.) includes non-VAT deductible amount 150,000 PLN, then it should be considered that this proportion should apply only to the net amount of the lease instalment or rent.

Consistently, the limitation should apply only to the net amount of the instalment or rent, not to the amount of VAT on that instalment (or rent) which is not deductible.

In this respect, there would be no provision other than regulation Article 16(1)(46) point (a) the Corporate Income Tax Act (and Article 23(1)(43) point (a) u.p.d.o.f.), according to which the tax costs do not generally include VAT, but VAT is charged at the tax cost in the part where the taxable person is not entitled to deduct VAT.

The tax authorities are opposed, but this is not justified in the existing legislation.

For example, in an individual interpretation from 4 October 2019 13 The Director of KIS confirmed the correct position of the taxable person that the unpaid part of VAT (50%) the capital instalment should be limited by it in proportion to the capital instalment itself.

This position is also presented by the MF in the Explanations which show that the proportion (set with a reduced amount) 150,000 PLN The amount of VAT included in the VAT deduction shall be applied to both the net amounts of the lease or rent, and the amount of VAT on those charges to the extent not deducted.

This position is particularly unfavourable for taxable persons exempt from VAT who are not entitled to deduct VAT at all. It must be considered that the coefficient to be applied by such a taxable person takes the following form:

• 150,000 PLN ÷ net vehicle price + 100% VAT
• or
• 121,951 PLN ÷ the net price of the vehicle.

In keeping with the conclusions of the MF explanations, it should also be considered that VAT-exempt taxpayers should apply the above coefficient to the total gross amount of the leasing instalment or rent.

The attempt to offset the tax effects of leasing or rental with the purchase of a vehicle also applies to electric cars. In case the amount of the above limit is 225,000 PLN, it should, by analogy, be reduced according to the taxable person's right to deduct VAT.

Example

The insurance intermediary, exclusively engaged in VAT-exempt activities, took advantage 2019 loading a passenger car of net value 145,000 PLN.

Given that its activities do not entitle it to deduct VAT, it will not accept the amount as the basis for the calculation of that part of the leasing instalment, which is included in the cost of obtaining revenue. 150,000 PLN, But 121,951.22 PLN.

The net amount of the lease payment paid — in the part on repayment of capital — is 4,000 PLN, and the VAT on this part of the leasing instalment is 920 PLN.

According to MF’s position, the total cost incurred in the amount 4,920 PLN the taxable person shall be included in the cost of obtaining revenue the amount determined according to the calculation of: 4,920 PLN × 121,951.22 PLN ÷ 145,000 PLN. Therefore, the cost of obtaining the taxpayer's income will be the amount 4,137.93 PLN.

The above example shows that in the case of taxable persons exempt from VAT, so that the car does not require restrictions, its purchase price by the leasing company should not exceed 121,951.22 PLN. It should also be stressed that in the literature on this issue (e.g.

in the MF explanations) a slightly different methodology for determining proportions can be met, with this methodology giving identical results, as presented above. Name 150,000 PLN the figure is fixed, the value of the car included in the denominator is increased by the amount of VAT not deductible.

From a mathematical point of view, both methodologies lead to identical results.

The above mentioned issues do not exhaustive However, the scale of the interpretation problems related to the new legislation.

It must be taken into account that, according to the general opinion of the tax authorities, the interest should always be eligible as the cost of debt financing (and subject to the limits of such related financing), regardless of whether the contract is operational or financial leasing for tax purposes.

Therefore, the legislator has adopted a solution whereby, in the case of a passenger car put into service under a tax lease agreement, the limitation of the cost of the instalment to the cost of obtaining revenue applies only to that part of the charge which represents the repayment of the value of the passenger car.

Thus, the limit set as the amount 150,000 PLN (or lower if the taxable person does not deduct against the car in question 100% VAT) to the value of the vehicle in the case of leasing contracts in question under Article 17a the Corporate Income Tax Act (and 23a u.p.d.o.f.

respectively), shall apply only to the capital part of the instalment.

It is also worth considering what the value of the car to which the amount should be referred means. 150,000 PLN (or lower).

In the opinion of the author, in the case of long-term leases or leases, where the net purchase price of the car by the leasing company is indicated, this price, in the net amount, should be taken as the value of the car for the calculation of the proportion.

However, in the case of leases for shorter periods, this price is not given to the beneficiary and the legislator therefore provided that, where a lease, lease or other similar contract was concluded for a period shorter than 6 months, the value of the car shall be understood to mean the value taken for insurance purposes.

It should be noted, however, that this definition of the value of the car does not solve the problem.

For example, by renting a car at an airport outside Poland, the taxpayer may not be able to obtain information on the value of the car accepted for insurance purposes.

In principle, this should not deprive him of the right to credit the expenditure incurred in connection with the rental of the revenue costs if the objective market value of that car does not exceed the amount 150,000 PLN.

Therefore, it seems reasonable to assume that if the taxpayer is able to prove, for example on the basis of the available price lists, that this condition is met, he will be entitled to charge expenditure for the cost of obtaining revenue even if he fails to obtain information on the value of that car accepted for insurance purposes.

This also appears to be the result of the MF explanations. With regard to this issue, MF pointed out that in obvious situations, for example, when the highest catalogue price for a particular car model is within the limit 150,000 PLN and 225,000 PLN for an electric car, it is sufficient that the taxable person has the appropriate documents confirming the value of that car (e.g. the price list of the manufacturer of the car model) from which the model is included in the limit in question.

According to the MF, these situations may in practice concern the hiring of a car abroad. In the case of short-term rental (e.g. carsharing), information on the value of the car may also be provided by an entrepreneur who deals with this type of activity (e.g. by providing customers with information on the value of the individual car models available in his offer). This position is also confirmed by the tax authorities, including the Director of the CIS in the interpretation of 15 April 2019

Individual interpretation of the Director of KIS from 15 April 2019 14

The value of the subject-matter of the contract should reflect its market value. If the contract specifies the value of a car which deviates significantly from the market value, such an action may be regarded as circumventing tax law.

Where a lease, lease or other similar contract has been concluded for a period less than 6 months, the value of the car is the value accepted for insurance purposes (Article 16(5d) the Corporate Income Tax Act).

If the contract does not specify the value of the car, the value of the passenger car resulting from the contract of his insurance may be accepted. In the absence thereof, this should be the value taken by the taxable person most in line with the market value of the car.

It is also necessary to clarify the situation in the case of rents for longer periods than 6 months during which the purchase price of the car by the rental company is not given.

If the option of recourse to objective market values of vehicles in the case of rental for periods not exceeding 6 months, it is also then that the presentation of such valuations should allow the expenditure to be credited with revenue costs if they do not exceed the limits indicated.

This should therefore be concluded in the light of the above interpretation.

Although the purpose of the amendments was undoubtedly to align, or at least to approximate, the rules for crediting taxpayers' expenditure on leasing and hiring passenger cars to the rules applicable to depreciation, the car leasing solution, and then its purchase, allows them to be credited to tax costs for higher amounts than for the acquisition of the vehicle themselves. This is due to the fact that the limit for rental and leasing costs functions independently of the limit for depreciation — it can therefore be concluded that we are dealing with two the limits which may apply to the same car, depending on whether it is used at the time under the lease agreement, or is already owned by the taxpayer.

For example, if the taxpayer is interested in a net car 250,000 PLN, maybe:

1. take the vehicle concerned in leasing, e.g. on 24 months and during the course of such a contract pay back 120,000 PLN – the simplification (i.e. excluding the VAT issue) to the cost of obtaining revenue from this result shall be calculated by the amount 72,000 PLN (i.e. 120,000 PLN × 150,000 PLN ÷ 250,000 PLN);
2. after the lease agreement has been concluded, purchase the car at a price 130,000 PLN i – if the taxpayer's purpose was to use it longer than 12 months – enter it in the register of fixed assets. Given that the initial value of the car would not exceed 150,000 PLN, Amortisation write-downs would be fully included in the revenue costs.

As a result, the taxpayer would be entitled to credit for the costs of obtaining a total revenue of 202,000 PLN.

In the meantime, when purchasing the car in question, without using the form of leasing and subsequent redemption, the taxpayer would be entitled to credit for the cost of obtaining depreciation revenue in an amount not exceeding total 150,000 PLN. The possibility of adopting such a solution is already confirmed by tax authorities, e.g.

in the interpretations of the Director of KIS from 15 April 2019[15] the Authority considered that the limit resulting from Article 16(1)(4) the Corporate Income Tax Act will concern the possible purchase of a passenger car after the expiry of the basic duration of the lease agreement, i.e. in case of subsequent depreciation.

On the other hand, the resulting operating lease agreement will be limited by the separate limit in question. Under Article 16(1)(49a) the Corporate Income Tax Act

Therefore, the taxpayer will be entitled to two quota-related limits 150,000 PLN for an operating lease agreement concluded, i.e.:

• 1) one specified under Article 16(1)(49a) the Corporate Income Tax Act – on the charges arising from the lease agreement,
• 2) second specified under Article 16(1)(4) the Corporate Income Tax Act – concerning any depreciation write-offs made after the purchase of the subject of the operating lease.
• 1.4. Transitional provisions

In addition to the provisions that create new rules for the settlement of leasing instalments, transitional provisions on leases, leases or leases concluded before 1 January 2019 In accordance with those provisions, the provisions on leasing, leasing, leasing or other contracts of a similar nature relating to a passenger car concluded before that date shall apply to the existing provisions of u.p.d.o.f. and the Corporate Income Tax Act Such a design of the transitional provisions triggered the phenomenon of mass conclusion at the end 2018 lease and lease agreements for the most expensive cars, and these vehicles have not yet been taken from dealers, and moreover, they may not even have been produced to the end 2018 With regard to this issue, the MF in the Explanations confirmed its earlier position that the leasing agreement is of a consensus nature and thus is effective by simply submitting compatible statements of intent to the parties to the agreement.

This also means that for the purpose of recognising the lease agreement as concluded In 2018 the issue of the vehicle itself that year was not necessary.

However, the Minister of Finance indicates that this thesis is true, if concluded before 1 January 2019 a lease, lease, lease or other similar contract contains all the mandatory elements of the legal activity for a particular type of contract.

MF then refers to the definition of the lease agreement concluded in the law with 23 April 1964 Civil Code 16 ((c) and the definition of ‘tax’ leasing contracts, indicating the elements required by Article 17b the Corporate Income Tax Act and Article 23b This action may mislead taxpayers, as the MF suggests that the possibility of applying the transitional provisions which are favourable to taxable persons should be limited to leasing contracts, including leases, leases or other similar contracts, which fulfil the conditions to be regarded as tax leasing contracts.

In the meantime, in accordance with the transitional provisions, the possibility of continuing the accounting rules in force before 1 January 2019 shall apply to any lease, lease, lease or similar contract which is the subject of a passenger car concluded before that date.

From the perspective of the possibility of applying old rules, it is therefore irrelevant whether the contract fulfilled (or not) the definition of the lease agreement (whether it is a definition from k.c. or from the Corporate Income Tax Act/(u.p.d.o.f.), and therefore whether it contained any relevant elements of those agreements.

It is therefore entirely unjustified to consider the position of the MF, from which it follows that, if concluded before 1 January 2019 a lease, lease, lease or other similar contract that does not contain all the elements relevant to the contract, the taxable person shall be at risk of considering that such contract does not give rise to the application of the transitional provision specified under Article 8(1) z.u.p.d.o.f.o.p.18, and therefore, it is not possible to apply the existing provisions of u.p.d.o.f.

or the Corporate Income Tax Act Despite confirmation of the possibility of receiving the vehicle for the purposes of such contracts after 31 December 2019, The MF in the Clarifications also confirms its previous position that, if the time limit for the receipt of a vehicle is significantly deferred on unjustified grounds of objective nature, such action may be considered as circumventing the provisions of tax law and thus subject to a general anti-tax avoidance clause.

At the same time, it appears from the transitional provisions that, in the case of rental, lease or lease contracts amended or renewed after 31 December 2018 the provisions are already to be amended. First, It should be pointed out that the mere fact of the lease or lease agreement can be controversial.

There should be no doubt that such a contract is concluded when In 2018 for a given car, in a separate lease or lease agreement, the parties shall specify all the required parameters (also necessary to place an order for the delivery of the car by the dealer station), the date of receipt and the duration of the contract (e.g.

36 months), and the car reception itself is planned for 2019 However, doubts arise already in the case of the so-called framework agreements, which provide for general conditions on the basis of which cars will be leased (rented) to the user, but for the effective start of the use of the vehicle, the user must place an order and then, at the time of receipt, confirm the order, signing the so-called detailed contract.

It should be stressed that the submitted orders specify the cars which will then be put into service to the user and which are submitted under the framework agreement.

Therefore, if these contracts, in the light of the framework agreement, were binding on both parties, it should be considered that, at the time of their submission, the lease agreement (or lease agreement) is effectively concluded, regardless of the fact that at the time of receipt the parties would confirm the contract by means of a detailed contract.

However, the Director of the CIS came to the opposite conclusion, which was interpreted from 24 April 2019 17 He accused the taxpayer that since the exact date on which the cars were put into service was introduced only at the stage of the specific contracts, it could not be considered that a prior determination of the duration of the contracts (e.g.

36 months) meant effective conclusion of a lease agreement. Director KIS stated that with Article 7091 k.c., it follows, inter alia, that the lease agreement is timely, as it is concluded on time.

In the assessment of the Authority, this means that it is necessary to indicate the date of start and end of use of individual vehicles (i.e. the duration of the lease agreement, as this element forms an essential part of the legal activity without which the contract is not concluded.

Such an exact start-up and end-of-use date for individual cars was only introduced at the stage of the conclusion of specific contracts, so the Director of KIS considered that the effective conclusion of the leasing contract could only be referred to at the time of the signing of these specific car use contracts.

All the conditions laid down in the contracts are finally confirmed and the duration of the lease is indicated.

If, therefore, these specific car use contracts are or will be signed after 31 December 2018, This, despite the prior conclusion of the framework agreement and the submission of detailed contracts, will apply to the settlement of the leasing tax costs. the Corporate Income Tax Act ed 1 January 2019

In line with the above approach of the Director of KIS, it is difficult to agree and the interpretation should be explicitly abrogated due to errors made by the tax authority.

The main issue is that, as with the MF in the subsequent explanations, the tax authority refers only to the provisions governing the lease agreement, without referring at all to other contracts.

In the meantime, even if the contract is named as a leasing contract, it does not have to meet the requirements of the lease agreement resulting from the K.c. – it can also be a long-term lease agreement.

However, the requirement to determine the time for which the contract is concluded also arises directly from the Corporate Income Tax Act, However, any time-limit in which the car would be put to use, including its designation as 36 months from the date of receipt.

This period was provided for by contracts submitted by the taxable person on the basis of a framework contract, which, in conjunction with their expected date of receipt, marked the time for which the contract is concluded.

The key question should therefore be whether such a contract is binding on the parties to the contract, not that the expected date of receipt of the vehicle may be postponed from a practical point of view.

Such interpretation as provided by the Director of KIS, in view of the widespread phenomenon of delay in time or, potentially, the acceleration of the reception of the vehicle, in relation to the date assumed in the contained In 2018 leasing contracts would result in few of these contracts being effectively concluded in the opinion of the Director of KIS. However, the standard solution, which undoubtedly creates the specified duration of the contract, is to define it as a specific number of months from the date of receipt, even if this date occurs sooner or later than originally assumed.

It is also not precisely defined what changes result in the need to apply the new rules.

However, given that a number of changes in the past have already been made to the rules on the deduction of VAT from cars, and these changes have always been accompanied by transitional provisions providing for the protection of acquired rights, the experience of previous years should be fed on in this respect.

At the same time, the MF also presented an approach whereby only such changes to the lease or lease agreement which resulted in an increase in the rights of the taxpayer (e.g. an increase in the amount of VAT to be deducted) entailed a break in the protection of acquired rights.

Consistently, in the present case, these should be only such changes as would result in an increase in the costs that the taxpayer could charge as tax costs. However, to clarify this issue should be counted in the tax explanations planned by the MF.

Doubts in this respect do not dispel the interpretations that have been made so far. On the one hand, Pages authorities confirm that the pickup of the car after 31 December 2018 does not imply the need to apply the new rules, even if certain details of the lease agreement are specified only at the time of this receipt (e.g.

the time limits for the payment of individual lease instalments, vehicle registration number) – the Director of the CIS expressed this position in an individual interpretation from 21 August 2019 18 .

However, the authorities point out that the change in the schedule of leasing instalments in such a way that some of the instalments are increasing, while others are decreasing, is seen by the tax authorities as a change resulting in the need to apply the new rules since they occurred[19].

There is no doubt, however, that the change, e.g. the renewal of the car rental contract, the value of which is significantly above 150,000 PLN, will be a change resulting in the application of the new rules. At the same time, this effect will apply to rental rents only after the change (renewal of the contract).

The change, which undoubtedly results in the need to cover the lease agreement with new rules, is also the assignment of such a contract.

If the value of the car after which the leasing company acquired the car for the purposes of the lease agreement concluded before 1 January 2019, exceeding 134,529 PLN, and the taxpayer is interested in entering into the rights and obligations of the former beneficiary, he must expect that the tax costs on his side will be limited.

Therefore, if the sale, i.e. the modification of the lease agreement, takes place In 2019, the new beneficiary will already have to apply the new rules, so it will only include part of the leasing instalments calculated using the coefficient 134,529 PLN to the value of the car resulting from the lease agreement.

Example

Taxpayer A entered into a car lease agreement in February 2018. The vehicle's net purchase price paid by the leasing company was PLN 145,000. The monthly net lease instalment is PLN 3,000, of which PLN 2,500 is the principal portion.

Taxpayer A no longer wishes to continue the lease and in May 2019 identified an entity that would take over the agreement from Taxpayer A, i.e. — with the leasing company's consent — assume all of Taxpayer A's rights and obligations.

The assignment of the lease agreement does not change any other terms of the agreement, in particular the amount of the lease instalment or the term of the agreement.

Although the lease agreement was concluded in 2018, and therefore under the previous rules, Taxpayer B, who will become the new lessee, will be entitled — if it deducts only 50% of the VAT on the vehicle — to include the principal portion of the lease instalment in tax-deductible costs in the ratio of PLN 134,529 to PLN 145,000.

The monthly tax-deductible cost will therefore be calculated as follows: PLN 2,500 × PLN 134,529 ÷ PLN 145,000 = PLN 2,319.47.

In this regard, the Director of KIS has already expressed several interpretations, including: 20 March 2019 20 and 21 March 2019 21 In the above interpretations, it was considered that the modification of the lease agreement, within the meaning of Article 8 z.u.p.d.o.f.o.p.18 – there will be a change which has or may have a significant impact on the effects of income tax, e.g.

the impact on the cost of obtaining revenue on the part of the taxpayer. Consequently, only amendment of the provisions in the contracts concluded before 1 January 2019, which has no effect on income tax, will not automatically imply the need for new rules.

According to the authorities, as a result of both the sale of leasing contracts and the transfer of these contracts under the company’s aport, the contracting party will be changed, i.e. a new entity will appear in place of the previous user.

As the Director of KIS states, after 1 January 2019 it is not possible for a transitional provision to be used by another entity (as opposed to the taxable person who originally concluded the lease agreement) which acquires the right and obligations associated with the lease contracts by way of assignment or transfer.

So, new lessee cannot benefit from the protection of acquired rights to the end 2018 In this case, the ‘new’ provisions applicable from 2019 The date of conclusion of the initial lease agreement does not affect the application of ‘old’ provisions.

This position is also presented by the MF in the Explanations according to which, in the case of the assignment of a leasing contract, the new beneficiary is obliged to apply the provisions in force from 1 January 2019 If, therefore, the value of the car after which the leasing company purchased the car for the purposes of the lease agreement concluded before 1 January 2019, exceeding 134,529 PLN, and the taxpayer intends to enter into the rights and obligations of the former beneficiary, should expect that the tax costs on his side will be limited.

If the sale, i.e. the change in the lease agreement, occurred In 2019, the new beneficiary must already apply the new rules and thus include only part of the leasing instalments calculated using the coefficient 134,529 PLN to the value of the car resulting from the lease agreement.

However, on the same basis as the sale of the lease agreement — for the purpose of applying the new rules — MF also treats situations where the change of the parties to the contract is secondary to the transformations (e.g.

the division of the company by separation under the provisions of the Act of 15 September 2000 Commercial Companies Code 22 , the transfer by a natural person of the entire undertaking to a company without legal personality, etc.).

It should be stressed that in the case of the transformations under consideration, it is applicable Article 93 and further laws with 29 August 1997 - Tax Ordinance 23 , hereafter: o.p., according to which the successor shall enter into any of the rights and obligations of the seller as provided for in the regulations.

So we are dealing with so-called universal succession. As the MF explains, however, the transitional provisions contained in the .u.p.d.o.f.o.p.18 are specific provisions in relation to Article 93 and the next O.P., standardising issues of tax succession.

Such a position cannot be accepted, which confirms the beneficial judgment of the WSA in Gliwice, 5 February 2020 24 , in which, however, the court did not address the issue of universal succession, but merely laconically stated that the modification of the party to the lease agreement was not a change which would have led to the need for new less favourable provisions by the new beneficiary. However, such a conclusion with regard to the ordinary assignment of the leasing contract seems too far-reaching, as confirmed, for example, by the judgement of the WSA in Warsaw with 7 February 2020 25 , according to which an operating lease assignment agreement on the basis of which a change takes place may result in tax advantages, such as the possibility to apply more favourable provisions in force to the end 2018 This is therefore a change that could affect income tax settlements and thus make it necessary to apply the limit indicated under Article 16(1)(49a) the Corporate Income Tax Act, applicable from 1 January 2019

In the Clarifications MF confirms that an amendment or renewal of the contract concluded before 1 January 2019 Each time it has a current effect. This means that the need to apply the new rules will arise from the amendment or renewal. Such a change therefore does not affect the taxable person's accounts made before their introduction.

Moreover, the MF tries to identify those changes which result in the need to apply new rules and those which do not affect the possibility to apply the provisions in force before 1 January 2019 It confirms that not all changes in the content of the contract entail the loss of the right to apply the provisions before 1 January 2019 As pointed out by the MF, in order to have an effect in the form of a loss of the right to apply the existing provisions, the amendment of the contract must be a substantial change in the content of the legal relationship between the party, which is not derived from the content of the contract itself.

Such a significant change will be, for example, the change of the subject matter of the lease agreement, the change of the contracting party (e.g. the leasing assignment).

In contrast, non-essential changes which, in the assessment of the MF, do not result in the need to apply new rules include:

1. changes that form part of the implementation of the lease agreement, i.e. they are the implementation of the provisions of this agreement, provided that the changes to the lease agreement were based on the contract — these changes undoubtedly include fluctuations in the amount of leasing instalments due to fluctuations in the WIBOR rate (for variable rate contracts),
2. technical changes (e.g. VIN number, vehicle specification) – in this context it is stressed that an important part of the contracts concluded at the end of the 2018 may not have invoked the VIN number, as it has not yet been known for the moment of concluding the contract and placing the order with the car dealer,
3. changes in the scope of non-funding services (e.g. vehicle insurance) – the position of the MF in this respect is fully understood, as the restrictions in question on the fees arising from leasing contracts do not apply to insurance premiums at all, and consequently the changes do not affect the application of the rental and leasing restrictions,
4. changes in the financial terms and conditions resulting from exchange rate changes in foreign currency denominated contracts – changes in this respect also do not constitute changes in the contract, but result from its application.

It should be stressed that the protection of acquired rights provided for in the legislation in question concerns only rental, lease or lease contracts concluded before the end of the contract. 2018 You can meet the thesis that it also includes fees resulting from service contracts, often accompanying rental contracts.

However, in the author's opinion, such a thesis is not correct – even if the taxpayer has concluded a service contract with the same entity that provides rental services to the taxpayer, the lease or leasing contract with the service contract cannot be identified.

In such cases, the limits laid down in the rules on the cost of using cars, in the form of 1 January 2019

Confirmations in this respect provide interpretations to the Director of KIS, including, for example, an interpretation from 15 April 2019 26 , where the tax authority considered that if the taxpayer concluded a lease agreement to the end 2018, in relation to such an agreement, the rules for the settlement of tax costs resulting from the provisions in force until the end of the contract will apply 2018 Only the amendment or renewal of the leasing contract will require the taxpayer to apply the new rules already laid down on the date of such action. Under Article 8(2) z.u.p.d.o.f.o.p.18.

On the other hand, the rules for the settlement of tax costs laid down under Article 16(1)(51) the Corporate Income Tax Act from 1 January 2019 apply to all taxpayers – it is not relevant when the lease/rental agreement was concluded. Provision Article 8 z.u.p.d.o.f.o.p.18 only applies to lease, lease, lease and other similar contracts, and Article 16(1)(51) the Corporate Income Tax Act applies to all taxpayers who use a passenger car, regardless of on what basis – whether they own the car or lease it or rent it.

Transitional provision, therefore, specified under Article 8 z.u.p.d.o.f.o.p.18, does not apply to Article 16(1)(51) the Corporate Income Tax Act – costs for the use of cars leased or rented from 1 January 2019 are limited as a tax cost on an equal basis with the cars of their own taxpayer.

Otherwise, it is appropriate to approach those situations where the lease instalment or rent included certain service elements (e.g.

technical review services) from the beginning of the contract – since the transitional provisions provide for the application of the existing rules to lease contracts or leases concluded to the end 2018, it should not apply to them from 1 January 2019 a provision ordering the separation from the instalment (actual) of the operating item covered by a separate limit.

The rules in force until the end should continue to apply consistently to the full instalment or rent 2018 However, it must be stressed that MF in the Explanations speaks against such interpretation, considering as a reasonable exclusion from the lease or rent, the cost of the service components and their application as of January 2019 – restrictions specific to operating costs.

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1. Reference no. 0113 KDIPT2-1.4011.315.2019.1.MM, Legalis.
2. For example, an individual interpretation of 12 September 2019, reference no. 0111-KDIB1-2.4010.255.2019.1.AK, Legalis.

20 reference no. 0114-KDIP3-1.4011.590.2018.1.MT, Legalis.

21 reference no. 0112-KDIL3-3.4011.435.2018.2.DS, Legalis.

24 reference no. I SA/Gl 1186/19, Legalis.

25 reference no. III SA/Wa 1586/19, Legalis.

26 reference no. 0111-KDIB1-3.4010.1.2019.2.MO, op. cit.

Legal basis

• Article 2(12) u.e.p.a.,

• Article 5(19a), Article 23(1)(4)(43)(47a), Article 23(5b)(5a), Article 23a u.p.d.o.f.,
• Article 4a(9a), Article 16(1)(4)(46)(49a), Article 16(5b)(5a), Article 17a the Corporate Income Tax Act,
• Article 86a(16) the VAT Act

The article comes from the book C.H. Beck "Bookkeeping and Tax Instructions" under ed. prof. nadzw. dr. hab. Artur Hołda, plus CD, ed. 2, 2020, https://www.ksiegarnia.beck.pl/19340-instrukcje-ksiegowe-i-podatkowe-artur-holda