Company vehicle used for private purposes by an employee and use of a car not entered in the register of fixed assets

There are several ways to use a passenger car as part of business activity. first of them is a situation in which it is a component of the company's assets which constitute a permanent measure.

In addition to this typical form of car use in business activities, there are also a number of other options in practice, including in particular: 1) the use of a private car of an entrepreneur for the purposes of such activity, 2) the use of a passenger car included in the assets of an undertaking which is not eligible as a permanent measure, 3) the use in the course of the business of a car under a lease, lease, lease or other similar contract, 4) the use by employees of their private car for the purposes of the employer in connection with business trips.

The company car can also be used for private purposes by the employee.

There are many doubts in practice about the tax settlements resulting from the use of the car as part of business activity, as specific regulations are provided for in this area, so in the law on 15 February 1992 on corporate income tax 1 (Next: 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.).

1. Company vehicle used for private purposes by the employee

Subject to Article 12(1) U.p.d.o.f.

revenue from the business relationship, the employment relationship, the placement work and the cooperative employment relationship shall be considered to be all kinds of cash payments and the monetary value of benefits in kind or their equivalents, irrespective of the source of the financing of those payments and benefits.

In particular, these are: basic salaries, overtime salaries, various types of allowances, prizes, equivalents for unused leave and any other amount, irrespective of whether their amount has been fixed in advance, and in addition the cash benefits incurred for the worker, as well as the value of other unpaid benefits or partly paid benefits.

In the light of this regulation, benefits made by the employer to workers who are free of charge constitute workers' employment relationship income, which in turn means the need to establish their value and tax the revenue generated.

When examining the questions of workers’ income from so-called unpaid benefits, it is necessary to refer to the judgment of the Constitutional Tribunal from 8 July 2014 3 . The statement of reasons shows that only a benefit which meets the following cumulative conditions can be considered as employee income:

• 1) has been fulfilled with the employee's consent (i.e. the employee has benefited fully voluntarily),
• 2) has been fulfilled in the interests of the employee (not in the interests of the employer) and has benefited him by increasing the assets or avoiding the expense he would have had to bear,
• 3) The benefit achieved by the employee shall be measurable and attributed to the individual worker (not available in a general way to all entities).

Example

The employer shall, in accordance with the accepted employment rules, make service cars available free of charge to employees for private use.

In such a situation, the employee undoubtedly benefits from the free-of-charge benefit in full voluntary terms, and this benefit is carried out in the interests of the worker and confers a measurable, individually assigned benefit on him, that is, to avoid the expense he would have to incur in providing and financing the means of communication for private purposes.

Thus, the value of this benefit under u.p.d.o.f. constitutes income from the employee's employment relationship.

It should be noted that from 2015 provisions have been introduced Article 12(2a-2c) u.p.d.o.f., laying down specific, lump sums rules for determining the revenue for unpaid benefits due to the use by employees of business cars for private purposes. At your disposal Article 12(2a) The monetary value of the unpaid benefit to a worker for the use of a business car for private purposes shall be determined at:

• 1) 250 PLN per month – for cars with engine capacity up to 1600 cm3,
• 2) 400 PLN per month – for cars with engine capacity above 1600 cm3.

Simultaneously under Article 12(2b) u.p.d.o.f. has been established that when a business car is used for private purposes for a part of a month, the value of the benefit shall be determined on each day of private use of the car at the rate of 1/30 fixed amounts under Article 12(2a) u.p.d.o.f.

Example

Employer In September 2020 made available to the employee a company passenger car for private use during the period 10–21 September 2020 The engine capacity of the vehicle made available is 2,000 cm3.

Since the car is used by the employee for private purposes only for part of the month (12 days), the income generated by the free benefit should be determined on the basis of Article 12(2a) in conjunction with Article 12(2b) u.p.d.o.f. Consequently, the value of the income generated by the employee in respect of the indicated unpaid benefit In September 2020 Common 160 PLN, resulting from the calculation of: (400 PLN ÷ 30) × 12 = 160 PLN.

It is also important to indicate Article 12(2c) u.p.d.o.f. This regulation establishes that if the benefit to the employee for the use of a business car for private purposes is partially paid, the employee's income is the difference between the defined value under Article 12(2a) either section 2b u.p.d.o.f. and the remuneration paid by the employee.

Example

In accordance with the remuneration rules in force in the workplace, employees who use their employer’s business cars for private purposes are liable for a fee of 100 PLN for each month of use of the vehicle and, respectively, 1/30 that amount for each day of use of the vehicle in the case of private use for part of the month. The employee used a private car with a capacity 1700 cm3 throughout September 2020 In that case, according to Article 12(2a)(2) in conjunction with Article 12(2c) u.p.d.o.f., employee income reached In September 2020 for a partially paid benefit, 300 PLN (which results from the calculation of: 400 PLN – 100 PLN = 300 PLN).

The introduction of a flat-rate form of taxation of workers' revenues from the use of business cars for private purposes was accepted as a solution which, as initially thought, would make it possible to determine clearly and unequivocally the value of employees' revenues.

However, it turned out quite quickly that this optimism was premature. Namely, in a number of tax authorities' interpretations, the position was presented in the light of which the Article 12(2a-2c) a.p.d.o.f.

a flat-rate income due to the use of a business car for private purposes does not include the cost of fuel consumed by the employee if the cost of acquiring that fuel is charged to the employer. The Director of IS in Łódź stated this in an individual interpretation from 20 May 2016

Individual interpretation of the IS Director in Łódź 20 May 2016 4

The flat-rate value of the benefit in question shall cover only the employer's costs resulting from the provision of a business car to the employee for private purposes. If the employer decides to cover the employee’s expenditure in addition, e.g. fuel used for purposes other than business purposes, then the value of that fuel will be the taxable income of the employee from the employment relationship, the amount of which should be determined on the basis of Article 12(2)(3) u.p.d.o.f.

However, it must be noted that the above-mentioned view, presented by the tax authorities, was challenged by a number of decisions of the administrative courts. In their judgments, these courts stressed that the wording Article 12(2a) u.p.d.o.f.

clearly indicates that the employer's benefit is not only to make the car available, but to ensure the possibility of proper use of the car – therefore also to bear the necessary expenses to enable such use (e.g. judgment of the WSA in Kraków with 14 September 2016 5 ).

This argument was also shared by the NSA in a judgment favourable to taxpayers from 10 July 2018, in which he dismissed MF’s cassation action against the judgment of the WSA in Wrocław from 23 November 2015 6 .

Judgment

Reference provision Article 12(2a) u.p.d.o.f. provides no basis for differentiation for tax purposes – which makes the authority – costs that may be covered by a flat-rate (e.g. insurance, current repairs and reviews) from those whose flat-rate does not cover (fuel). It all leads to the conclusion that the sound Article 12(2a) u.p.d.o.f.

fully justifies the interpretation that the value of the revenue for the use of a business car for private purposes also includes making available to the fuel worker concerned, which does not constitute a separate benefit 7 .

The Supreme Administrative Court in the above judgment therefore confirmed the established line of decisions of the provincial administrative courts, which, in a number of judgments repealing the rulings of individual tax law, indicated that there was no basis for the separate determination of the revenue for the free supply of fuel, the cost of which is borne by the employer.

This view was also confirmed by the NSA in its judgment of 19 July 2019 8 .

As a result of such a significant discrepancy between the rulings of the administrative courts and the tax authorities' rulings of individual tax law, MF issued 11 September 2020 the general interpretation in which he divided the argument of the administrative courts.

General interpretation MF from 11 September 2020 on the flat-rate income of a staff member relating to the use of a business car for private purposes 9

Taking therefore the argument contained in the single jurisprudence line of the administrative courts for interpretation Article 12(2a) u.p.d.o.f.

it must be stated that the flat-rate value of the unpaid benefit provided for in that provision includes the costs incurred by the employer for the maintenance and general use of the car, for example: fuel, insurance, tire replacement, current repairs, periodic reviews, which the workplace, as the owner of the car, must bear in order for the car to be efficient and be able to participate in road traffic.

The use of such a car sometimes entails additional costs, such as parking charges or highway tolls, which cannot be considered as benefits covered by the amount specified under Article 12(2a) u.p.d.o.f.

The legislature has clearly indicated that it is a service related to the use of a business car (whether it is free of charge – for private purposes) and not any derivative of travel costs of a car made available for private use.

2. Sale of a fixed passenger car

2.1. Sale of not fully amortised fixed asset

The question of determining the tax revenue in connection with the sale of a passenger car constituting a permanent measure has not so far raised much doubt in the case of fully depreciated fixed assets, since the sum of depreciation deductions made is equal to the initial value of the fixed asset.

However, in the legal state applicable to 31 December 2018 It was interesting that the measure disposed of was not completely tax-depreciated.

As shown by Article 16(1)(1) the Corporate Income Tax Act (Article 23(1)(1) (u.p.d.o.f.) the principle is that expenditure on the acquisition (production) of a fixed asset, updated in accordance with separate provisions, less the sum of depreciation deductions, is the cost of obtaining revenue in the event of the payment of the sale of fixed assets or of the WNiP, regardless of their duration.

This raises an important question regarding the rules for determining the cost of obtaining revenue when, according to Article 16(1)(4) the Corporate Income Tax Act (Article 23(1)(4) (u.p.d.o.f.) the value of the depreciation deductions paid to the tax burden of the cost of obtaining revenue shall be reduced by exceeding the limit on the value of the car indicated by that provision.

It should be noted that the literal wording Article 16(1)(1) the Corporate Income Tax Act (Article 23(1)(1) (u.p.d.o.f.), indicating the recognition of the tax costs of obtaining the revenue of the expenditure incurred in the acquisition of the fixed measure (in the case of its sale for payment) and reduced by the amount of depreciation, refers to the concept of depreciation write-offs, not to the part of such write-downs which has been included in the tax burden of the cost of obtaining the revenue. Therefore, for example, at the time of the sale of the passenger car to which the limit of depreciation was applied, which could be included in the cost of obtaining revenue of 20,000 EUR (depreciation completed before 1 January 2019), and whose initial value exceeded 20,000 EUR, the cost of obtaining revenue may have been recognised as expenditure on its acquisition, less the value of the depreciation deductions made covering both that part of the write-offs which has been credited with the tax burden of the cost of obtaining revenue and that part which did not constitute, according to the Article 16(1)(4) the Corporate Income Tax Act (Article 23(1)(4) u.p.d.o.f.).

It should be noted that in the area u.p.d.o.f. regulation Article 24(2) dd. 2 u.p.d.o.f. determines how income/losses are to be determined for the purpose of the disposal of the assets referred to under Article 14(2)(1) u.p.d.o.f.

In particular, with regard to fixed assets, income/loss is the difference between the profit from the sale payable and the initial value shown in the accounts of fixed assets and the WNiP, subject to Article 24(2)(2) u.p.d.o.f.

(not relevant to this issue), plus the sum of the depreciation premiums in question under Article 22h(1)(1) u.p.d.o.f., made from these measures and values.

Example

Entrepreneur (applicant of VAT exemption) In December 2017 acquired a new passenger car at a price 120,000 PLN, which has been entered in the accounts of fixed assets 28 December 2017 Value of depreciation deductions made In 2018 Common 24,000 PLN (120,000 PLN × 20%), with regard to the existing In 2018 content Article 23(1)(4) u.p.d.o.f.

the tax costs of obtaining revenue were included only 16,790 PLN. In December 2018 the car was sold for the amount 105,000 PLN. In order to properly determine the income resulting from the sale of the passenger car in question, it is appropriate to refer to Article 24(2)(1) u.p.d.o.f.

It should be noted that the income/loss from the sale of the passenger car in question (permanent measure) will be the difference between the income achieved (105,000 PLN) a the initial value shown in the fixed assets and the WNiP (120,000 PLN), plus the sum of the depreciation premiums in question. 22 hours section 1 point 1 u.p.d.o.f.

(24,000 PLN). Consequently, the taxable person has achieved income of 9,000 PLN, resulting from the calculation of: (105,000 PLN – 120,000 PLN) + 24,000 PLN.

1. 2. Rules for the determination of the tax costs and, respectively, income or loss on the sale of a fixed passenger car introduced from 1 January 2019

Regulations of the Act of 23 October 2018 amending the Personal Income Tax Act, the Corporate Income Tax Act and certain other acts[10] (hereafter: Amending Act) introduced from 1 January 2019 specific provisions the Corporate Income Tax Act and u.p.d.o.f., related to the principles of determining the tax costs of obtaining revenue and income and, respectively, losses due to the remunerated disposal of passenger cars which constitute permanent measures.

In the light of the new Article 16(5i) the Corporate Income Tax Act the cost of obtaining revenue from the sale of a previously acquired passenger car as a fixed asset is the expenditure on its acquisition, updated in accordance with separate provisions, in part not exceeding the amounts referred to respectively under Article 16(1)(4) the Corporate Income Tax Act, after deduction of this expenditure by the sum of depreciation deductions for the consumption of this car included in the cost of obtaining revenue.

This solution has been expressed by regulation Article 24(2a) u.p.d.o.f., according to which income or loss in the activity in question under Article 24(2) dd.

2 u.p.d.o.f., the difference between the revenue from the sale of that car and its initial value as shown in the accounts of fixed assets and the WNiP, in part not exceeding the amounts referred to respectively under Article 23(1)(4) u.p.d.o.f., after deduction of this value by the sum of depreciation deductions for the consumption of this car included in the cost of obtaining revenue.

Rules arising from both Article 16(5i) the Corporate Income Tax Act, as well as Article 24(2a) u.p.d.o.f.

shall not apply where costs or, respectively, income or loss are determined on the basis of the sale of the passenger car for consideration, if that car has previously 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 such a contract is the subject of the activities of the taxable person (Article 16(5j) the Corporate Income Tax Act, Article 24(2b) u.p.d.o.f.).

Standard Article 9 the amending law of a transitional nature establishes that provisions Article 24(2a) U.p.d.o.f.

and Article 16(5i) the Corporate Income Tax Act applies to passenger cars entered into the fixed assets register and the WNiP after 31 December 2018 This means that in relation to passenger cars which have been entered into the inventory of fixed assets to 31 December 2018, the rules for determining the tax costs and for duly determining the income or loss on the sale of a fixed passenger car, which were in force until the end of the 2018 – regardless of the fact that the disposal of such an asset will occur e.g.

In 2019

Example

Tax payer (natural person) 10 January 2019 bought a passenger car which on the day of purchase was entered into the register of fixed assets. The purchase price of the designated car as initial value was 300,000 PLN. Since February 2019 the vehicle has been amortised linearly at the rate 20%.

The monthly depreciation value is 5,000 PLN, of which, in relation to Article 23(1)(4) point (b) u.p.d.o.f. – the tax burden of obtaining income is the taxpayer's only 2,500 PLN a monthly depreciation copy. Then 20 January 2020 the taxpayer sold the car, and on sales achieved income of 270,000 PLN.

Since the indicated passenger car was entered into the fixed assets and WNiP records In 2019, new solutions introduced from 1 January 2019 Driving Article 24(2a) in the present case, the income from the sale of a passenger car will be the difference between the revenue from the sale of that car and its initial value shown in the accounts of fixed assets and the CLP, in part not exceeding the amounts in question respectively under Article 23(1)(4) u.p.d.o.f., after deduction of this value by the sum of depreciation premiums for the use of this car, included in the cost of obtaining revenue.

As a result:

1. revenue will be 270,000 PLN, revenue costs 120,000 PLN, which results from the calculation of: 150,000 (initial value not exceeding the amount in question under Article 23(1)(4) u.p.d.o.f. less 30,000 PLN (the sum of depreciation premiums included in the cost of obtaining revenue, i.e. 2500 × 12),
2. the income will therefore be 150,000 PLN.
3. Car not included in the inventory of fixed assets

A passenger car which is not an asset which is considered to be a permanent measure may be used for at least three the means, namely:

• 1) the passenger car is an element of the private assets of the entrepreneur (the natural person) and is used by him not only for private purposes but also for the needs of his business,
• 2) the passenger car is a non-permanent component of the company's assets,
• 3) an employee's personal car which is used by him for the purposes of the employer's activities.
• 2.1. Private business car used for business purposes

one from the common forms of use of passenger cars as part of the economic activity of an entrepreneur who is a natural person is the use of his private passenger car, and therefore a vehicle not entered into the register of fixed assets and WNiP, as well as a non-recognised asset of the entrepreneur.

Amended 1 January 2019 regulation Article 23(1)(46) u.p.d.o.f.

determines that the cost of obtaining revenue does not include the costs incurred for the costs of using, which is the property of a taxable person who is established by the economic operator, a car which is not an asset of the property in question under Article 14(2)(1) u.p.d.o.f., and contributions to the insurance of such a car.

These expenditures and contributions 20% are, however, the cost of obtaining revenue, provided that this car is also used for the purposes of the economic activity of the taxpayer.

It should be noted that at present – unlike the legal state in force to the end 2018 – For the purpose of determining the costs of obtaining revenues from the use of a private passenger car for business purposes, the taxpayer no longer keeps records of the vehicle's mileage (so-called kilometres) in order to determine the actual course of the vehicle for business purposes (limit of the costs incurred, which may have been included in the tax costs, was set at a rate per 1 km)

Consequently, the new solution – according to Article 23(1)(46) u.p.d.o.f. – the taxable person will be included in the cost of obtaining revenue only 20% the costs incurred for the use (including insurance premiums) of the passenger car forming part of its private property, if the following cumulative conditions are met:

• 1) the passenger car is the property of the taxable person,
• 2) the vehicle is also used for the purposes of the economic activity of the taxable person.

After first for the admissibility of the tax deduction of revenue costs 20% This appropriation is intended to cover the following expenditure: Article 23(1)(46) u.p.d.o.f. requires such a car to be owned by the taxpayer.

The question therefore arises as to whether this condition can be considered fulfilled when the vehicle is the subject of the joint ownership of the taxable person. Since the regulations of u.p.d.o.f.

do not provide for the definition of the concept of ownership, it is appropriate to refer to the Act of 23 April 1964 Civil Code 11 (Next: k.c.). Provision Article 195 k.c. determines that ownership of the same thing may be indivisible to several persons (share ownership).

If the joint ownership, regardless of its form (in fractions or aggregate parts), is a form of exercise of ownership, then on the ground Article 23(1)(46) u.p.d.o.f. should be considered to apply also to a taxable person using a private passenger car, of which he co-owners, for the purposes of his business.

This view is based on the position of tax authorities.

Individual interpretation of the Director of KIS from 21 February 2019 12

From a literal sound Article 23(1)(46) It follows from the above that expenditure may constitute the cost of obtaining income only if the passenger car used in the business is the property of the taxable person. At the same time, u.p.d.o.f. does not indicate what should be understood as property.

However, on purpose, the costs of using a passenger car which is not an asset in the course of an economic activity which is both the property of the taxpayer and its joint ownership should be treated equally.

Therefore, whether the car is owned or co-owned by the trader, it is operating expenditure on a passenger car which is not an asset component of the activity in question. Under Article 14(2)(1) u.p.d.o.f., will be included in the cost of obtaining revenue of 20%.

In addition, it should be stressed that the fact that the entrepreneur is the owner or co-owner of a passenger car does not entitle him to credit for the cost of obtaining the revenues of the business. 20% expenditure on the use and insurance of this vehicle.

The taxpayer must actually bear operating expenses for the car, which not only serves its personal purposes, but also for its business activities.

After second Article 23(1)(46) u.p.d.o.f. requires a private passenger car to be used also for purposes related to the economic activity of the taxpayer. This condition is included in the basic principle of accounting for expenditure in the tax burden of revenue costs provided for Article 22(1) u.p.d.o.f. Article 22(1) u.p.d.o.f.

as tax revenue costs shall be deemed to be costs incurred in order to generate revenue or preserve or secure the source of revenue, except for those indicated under Article 23 u.p.d.o.f. Although revised regulation Article 23(1)(46) u.p.d.o.f.

does not provide for any records or other instruments to demonstrate that a private car of a trader is also used for business purposes, but it is important to bear in mind the established position in which it is for the taxpayer to demonstrate the relationship between the cost incurred and the activity carried out.

A taxpayer who wants to make use of the possibility to charge to the cost of obtaining revenue 20% the costs associated with the use of a private passenger car for business purposes should consider introducing instruments to demonstrate that such a car is actually also used for business purposes (any form of registration that indicates that the taxable person used the car for business purposes).

1. 2. A passenger car which is part of a company's assets which is not a permanent measure

Still to the end 2018 in the regulatory area of both u.p.d.o.f.

and the Corporate Income Tax Act there was a rule that the cost of obtaining revenue is not considered to be incurred expenditure included in the cost of obtaining revenue (subject to Article 16(1)(30) the Corporate Income Tax Act and, respectively, Article 23(1)(36) U.p.d.o.f., relating to expenditure incurred on behalf of employees in connection with the use by them of cars for the purposes of the taxable person) for passenger cars not forming part of the taxpayer's assets (under u.p.d.o.f., for the use of non-registered fixed assets of a passenger car, including those which are owned by the economic operator, for the purposes of the taxable person's business), in part exceeding the amount resulting from the multiplication of the number of kilometres of actual running of the vehicle and the rates for 1 km of run, as defined in separate regulations issued by the competent minister.

In order to establish the actual operation of the car, the taxable person was obliged to keep records of the vehicle.

Thus, in the legal state in force to the end 2018 – if the Corporate Income Tax Act the obligation to account for the costs arising from the use of the passenger car, taking into account the vehicle record and the established rate for 1 km of course, it concerned passenger cars not forming part of the taxpayer's assets, but also in the u.p.d.o.f.

area, this formula for recognising the cost of obtaining revenue referred to passenger cars which were not entered in the records of fixed assets of the passenger car, and therefore also those which, for example, were not qualified by the taxpayer for fixed assets due to its low value.

From 1 January 2019 – in connection with the amendment Article 23(1)(46) u.p.d.o.f. and introduction Article 23(1)(46a) u.p.d.o.f.

under the amending law, the cost of obtaining revenue does not constitute 25% expenditure incurred, subject to the Article 23(1)(36) u.p.d.o.f., for the cost of using a passenger car, other than a specified under Article 23(1)(46) u.p.d.o.f., for the purposes of the taxable person’s economic activity, if the passenger car is also used for purposes not related to the economic activity of the taxable person.

The following are therefore excluded from the above principle of accounting for the costs associated with the use of a passenger car:

1. expenses incurred by the employer to employees for their use of cars for their activities (Article 21(1)(36) u.p.d.o.f.) and
2. expenditure incurred in connection with the costs of use (including insurance costs), which is the property of a taxable person operating an economic activity, of a passenger car which is not an asset in question under Article 14(2)(1) u.p.d.o.f. (Article 23(1)(46) u.p.d.o.f.).

Standard Article 14(2)(1) u.p.d.o.f. indicates that the income from business activity is also revenue from the sale of assets which are:

• 1) fixed assets or CHP subject to inclusion in the accounts of fixed assets and CHP,
• 2) assets in question under Article 22d(1) u.p.d.o.f., excluding ingredients whose initial value is determined according to Article 22g u.p.d.o.f. does not exceed 1,500 PLN,
• 3) assets which, in view of the expected period of use equal to or less than one year, have not been included in fixed assets or WNiP,
• 4) assets constituting a cooperative right to or participation in a usable establishment which according to Article 22n(3) u.p.d.o.f. are not included in the fixed assets and WNiP (Article 14(2)(1) point (d) u.p.d.o.f.)
• – used for economic activities or for special agricultural production.

In view of the rules mentioned, it should therefore be concluded that, as a result of the implementation of the 1 January 2019 changes in content Article 23(1)(46) u.p.d.o.f. and introduction Article 23(1)(46a) u.p.d.o.f.

the cost of obtaining revenues from the use of passenger cars which are components of the taxpayer's corporate property, other than as fixed assets but which are components of the property in question under Article 14(2)(1) point (a)–c u.p.d.o.f., are currently eligible for the cost of obtaining revenues according to the rules applicable to those passenger cars which are considered as fixed assets.

Example

Entrepreneur In 2018 acquired a used passenger car for business purposes at a price 9,000 PLN. According to Article 22d(1)(2) the taxpayer did not introduce the designated car into the accounts of fixed assets and WNiP and the purchase costs incurred were directly included in the tax costs.

To the end 2018 – in relation to the content of the regulation then applicable Article 23(1)(46) u.p.d.o.f., the taxable person kept records of the course of the vehicle and the costs of its use were included in the tax costs incurred, within the limits of the limit resulting from the course of the vehicle and the established rate for 1 km.

Since the taxpayer's car is an asset designated under Article 14(2)(1) point (b) u.p.d.o.f., In 2019 Regulations will not apply to the accounting of costs arising from the operation of this car Article 23(1)(46) u.p.d.o.f.

Article 23(1)(46a) u.p.d.o.f., starting with 1 January 2019, the taxable person may include tax costs 75% the costs incurred for using that car, if it is also used for purposes not related to the economic activity of the taxable person; or 100% the costs incurred for using this car, if it is used solely for business purposes.

When qualifying whether a car is used solely for business purposes, regulations will apply. Article 23(5a)(5f)(5g-5h) u.p.d.o.f.

It is also worth noting the current content Article 16(1)(51) the Corporate Income Tax Act This regulation shows that, as in the case of passenger cars which are a permanent measure, also in relation to the operation of passenger cars which are not included in fixed assets, the taxable person may include tax costs 75% the costs incurred for using that car, if it is also used for purposes not related to the economic activity of the taxable person, or 100% the costs incurred for the use of this car, if it is used solely for the purpose of the operation. The determination that a car is used for business purposes, as in the case of cars which constitute a permanent measure of the taxpayer, is made on the basis of regulations Article 16(5f-5h) the Corporate Income Tax Act However, this qualification excludes expenditure on workers to reimburse the costs of using cars for the purposes of the taxpayer (according to Article 16(1)(30) the Corporate Income Tax Act).

2.3. Worker's car used for the purposes of the employer's activities

The different qualification is applicable to expenditure incurred on behalf of employees for the use of cars by them for the purposes of the taxpayer. In this respect, the rule established by the wording applies Article 16(1)(30) the Corporate Income Tax Act (Article 23(1)(36) In its light, it does not consider the tax costs of obtaining the income of expenses to employees for their use of cars for the purposes of the taxpayer:

• 1) for a business trip (off-site vehicles) of more than the amount fixed at the rates per one km of vehicle running,
• 2) in local riding, in excess of the monthly flat-rate or in excess of the rate for 1 km of vehicle run as defined in separate regulations issued by the relevant minister.

Article 16(5) the Corporate Income Tax Act (Article 23(5) (u.p.d.o.f.) it appears that the mileage of the vehicle concerned under Article 16(1)(30) the Corporate Income Tax Act (Article 23(1)(36) (u.p.d.o.f.) should be, excluding a flat-rate payment, documented in the vehicle record at the end of each month. Simultaneously Article 16(5) the Corporate Income Tax Act (Article 23(7) (u.p.d.o.f.) require that such records contain at least:

• 1) the name and address of the person using the vehicle,
• 2) vehicle registration number and engine capacity,
• 3) another entry number,
• 4) date and purpose of departure,
• 5) description of the route (where to),
• 6) the number of kilometres actually driven,
• 7) Rate per 1 km,
• 8) the amount resulting from the multiplication of the number of kilometres actually driven and the rate per 1 km,
• 9) the signature of the taxable person (employer) and his data.

It should be stressed that in cases where Article 16(1)(30) the Corporate Income Tax Act (Article 23(1)(36) (u.p.d.o.f.) there is an obligation to keep records of the course of the vehicle; the absence of such records results in the exclusion of expenses incurred to the employee in connection with the use of the car for the purposes of the activity of the taxable person from tax costs.

3. Accountancy of car-related operations

If the purchased passenger car meets the conditions for fixed assets under Article 3(1)(15) Act on 29 September 1994 on accounting 13 (hereafter: u.o.r.), it should be entered in the accounts of fixed assets and be depreciated on general terms. The record of that event may be recorded in this case:

1. initial value of the purchased car – based on OT proof: Wn account ‘Permanent assets’, has an account ‘Constructed fixed assets’ or ‘Accounted purchase’;
2. shock absorbers:

En account “Amortization” or team account 5, It has an account called "Depreciation of fixed assets".

If the value of the purchased car is low (and so is sometimes at a clearing purchase), another option may be to introduce the passenger car to the inventory of fixed assets and make a one-off depreciation write-off in the month of acceptance for use or in the following month. This possibility is due to Article 32(6) u.o.r.

According to that provision, for fixed assets with a low unit initial value, depreciation or write-off may be established in a simplified manner by making collective write-downs for groups of measures similar to the type and intended use or once by writing off the value of such fixed assets.

Where accounts are kept, the operating costs shall be recorded on the account responsible for the type of cost incurred:

• 1) fuel, lubricants, wipers and spare parts in the ‘Use of materials’ account,
• 2) the cost of repairs, revisions to the ‘Foreign services’ account,
• 3) the costs of parking or motorway crossings in the ‘Other generic costs’ account,
• 4) VAT not deducted from the ‘Taxes and charges’ account if it is not included as an element of the purchase price in the ‘Use of materials’ or ‘Foreign services’ accounts

Where part of the cost cannot be included in the cost of obtaining revenue, it is most convenient to keep analytical records to the relevant accounts:

• 1) the consumption of materials constituting revenue costs,
• 2) the consumption of materials not constituting the cost of obtaining revenue.

Example – record of purchase of tyres (no bolt)

The company has acquired a set of summer tires for 2,800 PLN + 23% VAT and exchange service for 150 PLN + 23% VAT. The above editions concern a car serving only business activity. The following shall be included:

1) invoice confirming the acquisition of:

• Wn account “Cost Clearance” – 3,628.5 PLN,
• It has an account called “Contracts with Suppliers” – 3,628.5 PLN;

2) cost take-up:

• En account “Use of materials” – 2,800 PLN,
• Wn account ‘Foreign Services’ – 150 PLN,
• Wn account ‘VAT charged’ (if deductible) – 678.5 PLN,

He has an account “Accounting Purchase” – 3,628.5 PLN.

If the entity also maintains cost records by place of origin, it will settle this expenditure:

Wn account “Management expenses/sales costs/other costs according to functional layout” – 2,950 PLN,

It has a “cost statement” account – 2,950 PLN.

If a passenger vehicle is not used exclusively for business activity, or if an entity, on account of the exemption in question or entity, is not able to deduct input VAT, or because of the pursuit of taxable and VAT-exempt activities, it is not entitled to deduct the input VAT in full, it will recognise that tax as a cost. It may be accounted for if it applies the purchase price to the purchased materials, to the ‘Use of materials’ account, or if the materials are recorded at purchase prices, to the ‘Taxes and charges, non- deducted VAT’ account.

Example

The Polish limited liability company. acquired a set of winter tires for 2,800 PLN + 23% VAT and exchange service for 150 PLN + 23% VAT. These expenditures concern a passenger car which is a durable vehicle for which VAT records are not kept.

Expenditure will be included:

1) invoice confirming the acquisition of:

• Wn account “Cost Clearance” – 3,628.5 PLN,
• It has an account called “Contracts with Suppliers” – 3,628.5 PLN;

2) cost take-up:

• En account “Use of materials” – 2,800 PLN,
• Wn account ‘Foreign Services’ – 150 PLN,
• En account ‘Taxes and charges, non-refundable VAT’ — 339.25 PLN,
• Wn ‘VAT account charged’ (subordinated to deduct in 50%) – 339.25 PLN,

He has an account “Accounting Purchase” – 3,628.5 PLN.

If the entity also maintains cost records by place of origin, it will settle this expenditure:

Wn account “Management expenses/sales costs/other costs according to functional layout” – 3,289.25 PLN,

It has a “cost statement” account – 3,289.25 PLN.

The revenue from the sale of a fixed vehicle arises whether or not it has been fully depreciated. If it was not, then at the time of its sale, expenditure on the acquisition or production of this fixed measure shall be included in the cost of obtaining revenue, minus the sum of the depreciation premiums constituting the costs.

The measure sold must be deleted from the accounts of fixed assets and of the CIS at the date of the sale. If accounts are kept, the sales revenue is the remaining operating income and the unmortised value is the remaining operating cost.

Example – sale of a truck

In March 2020 the taxpayer sold the truck, entered in the fixed assets and WNiP records at a price 55,000 PLN net, VAT 23% – 12,650 PLN. Its initial value was 130,000 PLN, However, the height of the shock absorbers made from this vehicle is 98,000 PLN (of which 12,000 PLN not accounting for revenue costs).

Account entries:

1) invoice for the vehicle sold:

• Wn account “Receipt settlements” – 67,650 PLN,
• Has a ‘VAT due’ account – 12,650 PLN,
• Has an account ‘Other operating revenue’ – 55,000 PLN;

2) debooking the unmortised value of the car:

• Wn account ‘Other operating costs’ – 32,000 PLN,
• Sun’s fixed assets write-off account – 98,000 PLN,

It has a permanent means account – 130,000 PLN.

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1 Act of 15 February 1992 corporate income tax, i.e. Journal of Laws of 2020, item 1406.

2 Act of 26 July 1991 on income tax on individuals, i.e. Journal of Laws of 2020, item 1426 as amended

3 Judgment of the Constitutional Tribunal of 8 July 2014, reference no. K 7/13, Legalis.

4 reference no. 1061-IPTPB1.4511.191.2016.2.KLK, Legalis.

5 Judgment of the WSA in Kraków 14 September 2016, reference no. I SA/Kr 824/16, Legalis.

6 Judgment of the WSA in Wrocław with 23 November 2015, reference no. I SA/Wr 1595/15, Legalis.

7 NSA judgment of 10 July 2018, reference no. II FSK 1185/16, Legalis.

8 NSA judgment of 19 July 2019, reference no. II FSK 2050/17, Legalis.

9 General interpretation MF from 11 September 2020 on the flat-rate income of a staff member relating to the use of a business car for private purposes, reference no. DD3.8201.1.2020, Legalis.

10 Act of 23 October 2018 amending the Personal Income Tax Act, the Corporate Income Tax Act and certain other laws, Journal of Laws of 2018, item 2159.

11 Act of 23 April 1964 Civil code, i.e. Journal of Laws of 2020, item 1740.

12 Individual interpretation of the Director of KIS from 21 February 2019, reference no. 0112-KDIL3-1.4011.25.2019.1.KF, Legalis.

13 i.e. Journal of Laws of 2019, item 351, as amended

Legal basis

• Article 195 k.c.
• Article 5a(19a), Article 14(2)(1)(12), Article 14(3)(3a), Article 22(1)(8), Article 22a-22o, Article 23(1)(1)(4)(32)(36)(43)(46-48), Article 23(5-5b)(5e-5h), Article 24(2)(2a) u.p.d.o.f.,
• Article 4a(9a), Article 12(1)(1), Article 12(4)(6a), Article 15(1)(6), Article 16(1)(1)(4)(11)(30)(46)(48-51), Article 16(5-5b)(5f-5j), Article 16a-16m, Article 17a(1) the Corporate Income Tax Act,
• Article 1(7)(8), Article 2(6), Article 9(15) Amending Act.

The article comes from the book C.H. Beck Publishing House “The Tax and Balance Sheet Closing of the Year 2020” under the ed. prof. nazw. dr hab. Artur Hołda, https://www.ksiegarnia.beck.pl/19591-podatkowe-i-bilansowe-zamkniecie-roku-2020-artur-holda