Purchase of a passenger car from operating lease after conclusion of the contract
The vast majority of leasing contracts concluded are operating lease agreements. In the operational lease, the beneficiary may use the right to purchase the lease after the end of the basic contract period, as it was in fixed assets during the duration of the contract leasing provider. Tax payers may purchase a passenger car from leasing for private purposes or in the course of their business.
Purchase of a passenger car from leasing in the course of business
In connection with the acquisition of a leasing car, the entrepreneur receives a VAT invoice documenting the sale. This is a separate operation from the invoicing of leasing instalments, since operating leasing under the tax on goods and services is a service, whereas the purchase of a passenger car from leasing is a supply of goods.
Purchased passenger car from leasing can be introduced to the company as a permanent measure or as a one-off inclusion in company costs (if the purchase value does not exceed 10,000 PLN net for VAT taxable persons, gross for non-VAT taxable persons).
Purchase of the car above 10,000 PLN
Where the initial value from the invoice documenting the purchase of a passenger car from leasing exceeds the amount 10,000 PLN (net in the case of active VAT and gross taxable persons exempt from VAT), the taxable person is required to introduce the vehicle into the records of fixed assets and to make depreciation on the basis of the depreciation plan laid down, which results from the Article 22f(3) PDOFIZU. The initial value must then be taken as the purchase price by which the amount due to the seller plus the purchase costs, calculated by the date of the transfer of the fixed asset for use and minus the VAT chargeable and adjusted for any exchange rate differences (Article 22g(3)(5) PDOFizU).
Purchase of the car below 10,000 PLN
Where the initial value of the purchased car does not exceed 10,000 PLN (net in the case of active VAT or gross taxable persons in the case of taxable persons benefiting from VAT exemption, expenditure on their acquisition may be included directly in the cost of obtaining income in the month of putting it into service. For a vehicle with a value below 10,000 PLN there are no contraindications that it is entered in the accounts of fixed assets and depreciated over time or once.
Purchase of a passenger car from leasing and VAT settlement
Active VAT payers have the right to deduct VAT calculated on the basis of an invoice documenting the purchase of a car from leasing, provided that it is used for taxed activities? The use of the purchased car will affect the value of the VAT deducted. In the case of passenger cars, the entrepreneur has the right to deduct the value of VAT in two variants:
50% the value of VAT when the vehicle is used for private and business purposes; This type of use of the car allows to deduct only half of VAT from the redemption invoice, while the remainder of the tax can be added by the entrepreneur to the initial value of the amortised car.
100% value of VAT – when the vehicle is used solely for business purposes. Entrepreneurs who wish to exercise the right to deduct 100% VAT on expenditure relating to passenger cars must comply with additional conditions which provide evidence of the use of the vehicle for company purposes only.
Purchase of a passenger car from private leasing
If a leasing company submits a private buy-out offer, there is no reason why a passenger car previously used under an operating lease contract in its business, should be purchased for private use. However, the right to deduct VAT resulting from the invoice cannot be exercised. Nor is it possible to charge the purchase costs to the cost of obtaining revenue.
Purchase of a car from private leasing from 2022
Amendments introduced by the so-called Act ‘Polish Deal” have harmonised the way in which the sale of cars purchased from leasing for private purposes is accounted for.
According to Article 10(2)(4) The PDOFIZU car purchased from leasing, including for private purposes, will not be allowed to be sold without tax until after the end of 6 years.
Sale of a car purchased from leasing for private purposes, starting with 2022, After 6 months after the redemption, contrary to the legal status prior to 1 January 2022, results in the obligation to tax transactions.
Tax-free sales are made if the 6 years between the first day of the month following the month in which those components were withdrawn from business activities or purchased for private purposes and the date of their disposal for payment.
If a car purchased from leasing for private purposes a trader decides to use it also for his business activity, then the cost of obtaining income can only be classified as an entrepreneur 20% the value of expenditure incurred. This is due to Article 23(1)(46) PDOFizU Act, according to which it is not considered to be the cost of obtaining revenue from expenditure incurred on the costs of using, which is the property of a taxable person operating an economic activity, a passenger car which is not a component of the property in question under Article 14(2)(1) PDOFizU, and insurance premiums for such a car; these expenses and contributions of 20% are, however, the cost of obtaining revenues provided that the car is also used for the purposes of the economic activity of the taxable person.
Sale of privately purchased car from operating leasing
Sale of a privately leased car under the PDOFizU following changes in the so-called Act ‘Polish Deal”
Under the so-called law ‘Polish Deal” changed Article 10(2) PDOFizU and Article 14(2) PDOFIZU. As per content Article 14(2)(19) PDOFizU operating income is also revenue from the free disposal of movable goods used for business purposes or for the operation of special agricultural production units under a lease agreement.
In turn, as it states Article 10(2)(4) PDOFizU, the exemption from taxation on sales after half a year after purchase for private purposes shall not apply to the components in question under Article 14(2)(19).
Their sale before expiry 6 the years from the end of the month in which they were withdrawn from the business, including those purchased from leasing for private purposes, constitutes the income from the activity.
This means that from 1 January 2022 revenue from the sale of a lease car purchased into a personal property shall be regarded as income from business if between the first day of the month following the month in which the vehicle is withdrawn and the date of disposal will not expire 6 years.
In order for the taxpayer not to be obliged to pay tax on sales income in the course of business, he must wait 6 years after the car was withdrawn from the company. According to Article 51 The so-called law ‘Polish Deal”, the above provisions apply to ingredients acquired after 31 December 2021.
Eligibility of expenditure related to the use of a passenger car in business within the limits of the value of the car
The cost of obtaining the income of expenses incurred by the entrepreneur for the use of the car in the course of business activities
The Polish legislature in special tax regulations provided for a number of exemptions resulting from Article 23(1) PDOFizU and Article 16(1) PDOPU relating to the possibility for the entrepreneur to charge the expenses incurred in the tax costs of the activity. The mentioned restrictions also concern the matter concerning the possibility of including in the tax costs of the entrepreneur expenses related to the use of a passenger car by the entrepreneur, which is the subject of leasing and related costs.
Under regulation under Article 16(1)(49a) PDPPU and Article 23(1)(47a) The PDO to be included by the entrepreneur in the cost of obtaining the revenue of expenses incurred in connection with the use, in the business activity of the passenger car which is the subject of operating leasing, should be carried out within the limit of the value of the car resulting from the above provisions.
i.e. quotas 150,000 PLN (Non-electrical cars). If the value of the car exceeds the above amount, the entrepreneur may include in the tax costs the expenditure on the car in proportion to the amount 150,000 PLN to the value of the car.
The determination of the car value for the calculation of the proportion should take into account 50% input VAT, which is not deductible due to the provisions of the Goods and Services Tax Act.
For example, if the value of the passenger car is net 300,000 PLN, VAT on this amount 69,000 PLN, In order to determine the value of the car, therefore, the net value of the car must be summed up and 50% VAT, which in this example is 34,500 PLN.
Therefore, the value of the car for determining the proportion of expenditure included in the tax costs is 334,500 PLN.
After the calculations have been made, it should be pointed out that the taxable person will be able to take into account in the cost of obtaining revenue the expenses incurred in the use of the car subject to leasing in the amount of 44.84% expenditure incurred.
Expenditure incurred by the taxable person on the operation of the vehicle
Tax laws provide that, where a passenger car which is the subject of leasing is used by a taxable person for both business and private purposes, any expenditure incurred by the taxable person for the operation of the vehicle i.e. Fuel acquisition, car servicing, tire replacement, car wash, highway tolls, etc.
are limited by regulations Article 23(1)(46a) PDOFizU and Article 16(1)(51) PDOPrU, which indicate that only 75% costs incurred may be included in the tax costs of the trader. When calculating the tax costs for the operation of a passenger car, the net amount of the expenditure should be added 50% VAT not deductible.
In the case of an entrepreneur who incurs an operating expense of a car of 100 PLN net and VAT is equal 23 PLN, the entrepreneur will be able to include in the tax costs 75% expenditure, in this example it will be 83.63 PLN.
Expenditure related to vehicle insurance
A particular type of expenditure subject to separate tax regulations shall be expenditure on vehicle insurance. The expenses incurred by the entrepreneur for the purchase of supplementary vehicle insurance have been regulated accordingly. Under Article 23(1)(47) PDOFizU and Article 16(1)(49) PPOPU.
The above provisions limit the possibility of including in tax expenses incurred in purchasing additional AC insurance of a passenger car when the value of the car determined for the purposes of the insurance contract exceeds 150,000 PLN.
The entrepreneur must determine the proportion of the value of the car determined for insurance purposes in relation to the amount 150,000 PLN and after its determination, determine which part of the paid contribution to AC will be included in the tax costs.
At the same time, the indication requires that the above restrictions do not apply to the insurance of the OC and NW concluded by the taxpayer, since they do not constitute insurance of the passenger car and as such can be included in the company's tax costs.
Purchase of the car in operating leasing
The prevailing view now states that the purchase by the trader of a leased passenger car, under tax law, constitutes a separate transaction from the lease agreement and is therefore covered by a separate, second limit resulting from Article 23(1)(4) point (b) PDOFizU and analogue Article 16(1)(4) point b) PPOPU. Consequently, the taxable person at the time of the purchase of a passenger car subject to leasing re-establishes its value for future depreciation taking into account the limit 150,000 PLN and after that value has been established, in the event that the above limit is exceeded, it shall determine what part of the depreciation deductions will be proportionally the tax costs for it.