The purchase of a car intended for the pursuit of business involves paying VAT or civil law (PCC). The existence of this alternative is due to the provisions of the Act of Law of 9 September 2000 on the tax on civil law activities (hereinafter referred to as the PCC Act).
The status of this transaction from the point of view of both taxes depends on whether the Seller or the Buyer will be taxed on VAT at a rate taxed or exempt.
For an entrepreneur buying a car especially a passenger car, which is an active VAT taxable person, the tax status of PCC transactions or VAT is of great importance, especially in recent months of liberalisation of the VAT deduction provisions, which have been discussed in other parts of the publication.
The purchase often involves VAT deduction for the buyer, whereas in the event of a PCC tax obligation, the value of the tax paid may increase the initial value of the car entered in the register of fixed assets.
Recent dynamic changes in the taxation of car sales from the point of view of the legislation on goods and services are not relevant to the PCC or VAT dilemma.
When PCC and When VAT
When concluding a contract to sell a car subject to a civil law tax under Article 1(1) point (a) and the obligation to pay the tax on civil acts is imposed on the buyer and arises when the civil act is carried out, i.e. when the sale contract is signed.
Based on Article 7(1)(1) PCC law tax rate for sales of, among other things, movable goods such as cars is 2%.
By Article 4(1) PCC law tax liability on the sale of a pregnancy on the buyer, which is obliged during the 14 the dates from the date of the tax obligation to submit a declaration on the tax on civil law acts and to calculate and pay the tax.
If the parties to the contract decided to conclude the contract in the form of a notarial act, the buyer would not be responsible for the calculation and payment of the tax, as the notary is responsible for collecting the tax and withdrawing it to the tax office's account.
Due to the nature of the article, it is difficult to rely on detailed statistical data, but it can be concluded from a brief observation of the behaviour of entrepreneurs that in most cases the acquisition of a car for business activity does not result in a tax obligation for this tax.
This is due to the fact that the majority of the purchases of a car for business activity are concluded between VAT taxable persons for whom this activity will be carried out as a taxable activity at a tax-based or exempt rate, which is crucial for the content of the PCC Act.
According to Article 2(4) PCC tax legislation shall not be subject to civil law acts other than the articles of association and its amendments if at least one of the parties for the performance of this activity is taxed on goods and services or is exempt from the tax on goods and services.
The point of gravity is on the basis of the performance of the sales activity itself and not of the entity scope of the parties to the contract, i.e.
from the point of view of PCC, the tax status of the buyer remains essentially irrelevant (unless, in this execution, the buyer is not a VAT taxable person who is obliged to charge the tax on his own account at a rate taxed or exempt) but it is important that the parties to the contract treat the purchase-sale of the car as a taxed or exempt activity carried out by the active VAT payer for that transaction.
Entrepreneurs often misinterpret the content of the provision, taking the view that if the buyer or seller has VAT status regardless of the tax status of the car acquisition transaction, this already entitles the transaction to be excluded from the PCC.
Only those transactions in which a VAT taxable person considers the transaction to be an activity carried out in the course of his business, at a rate of VAT or exempt, shall be excluded from PCC. The seller is obliged to issue a VAT invoice documenting the transaction and to settle the tax due accordingly.
If an entrepreneur purchases a car from a person who for this activity is not a VAT taxable person, this results in the obligation to pay tax on civil law activities at the rate of Article 7 PCC Act.
Due to the content Article 4(1) The PCC Act, currently it is not possible to conclude in the sales contract a clause that the seller or the parties after half are liable for the removal of the tax, the tax obligation in this respect is attributed to the provision strictly applicable only to the buyer.
If the entrepreneur decides to carry out the purchase operation as a non-taxable activity, that is, acquires a car from a person who will not pay the PCC on the gross value of the car for that activity.
Not without meaning, as an activity not subject to VAT, has been defined by an entity that is not a VAT taxable person for the sale of a car in question. It may therefore be a non-business person, and it may also be a VAT taxable person, a natural person conducting an economic activity who decides to sell a car from private property.
It is therefore important for the buyer to ensure that the purchased car is a business property of a taxable person, or a private property of that party.
Only in the case of the sale of a car which is an asset of a business entity, this transaction will be exempt from the regime from the provisions of the PCC Act concerning the formation of a tax obligation.
Since the obligation to pay PCC tax is imposed on the buyer, it should pay particular attention to whether the car belongs to the company or is a component of the private property of the seller.