Since the beginning of the year 2015 VAT deduction from passenger cars used for business and private purposes is of great interest. The most controversy is caused by a limited right of deduction 100% VAT on cars used for mixed purposes. In many of the cases analysed so far, tax authorities have denied taxpayers this right, including if employees bear the costs of using the car for their own needs.
Łódź tax representative's interpretation is one of many adverse decisions for taxpayers. A similar view was expressed by the Minister of Finance in an individual interpretation at 24 July 2014 [No IBPP2/442-374/14/BW].
For example 23 September 2014 Director of the Tax Chamber in Łódź, acting on behalf of the Minister of Finance (Event No. IPTPP4/443-447/14-4/MK) did not share the opinion of the Applicant and did not agree to the deduction 100% VAT on cars used by employees for business and private purposes.
The decision was not affected by the Applicant's declaration of signing a contract with employees with responsibility for the property entrusted. It was irrelevant that the employer charged a private car charge of 20% the monthly costs incurred in maintaining them, in particular on repair and maintenance invoices.
According to the tax, the payment for the use of cars for private purposes does not prejudge that the car will be used solely for business purposes.
The Director of the Tax Chamber in Łódź also stressed that the transport of a worker from his place of residence to the place of work by a business car cannot be clearly defined as an activity carried out in the course of business activity.
It is impossible to determine whether a journey takes place in the field of duty or after working hours. Such a situation excludes the possibility of fully deducting VAT from expenditure incurred on the maintenance of motor vehicles.
Therefore, the Applicant is only entitled to 50% the right to deduct VAT on repair and maintenance expenditure.
The tax authorities do not dispute the validity of the finding that the transfer of a car for private use for a fee constitutes its use in the course of business.
However, they stress that, in the light of the current legislation, in order to be able to benefit from the full VAT deduction, the employer must demonstrate that the car is not used for purposes not related to economic activity and that this is not even possible.
The taxpayer's requests for interpretations addressed to the Directors of Tax Chambers propose ways of demonstrating the inability to use private cars.
In the opinion of taxpayers, in order to achieve this, they should properly introduce regulations and regulations and supervise the use of cars when performing their business duties with a GPS device.
However, as has been interpreted, it may not be sufficient to demonstrate the use of business cars only and exclusively within the framework of business.
Łódź tax representative's interpretation is one of many adverse decisions for taxpayers. A similar view was expressed by the Minister of Finance in an individual interpretation at 24 July 2014 [No IBPP2/442-374/14/BW]. The Provincial Administrative Court in Krakow adopted a different position in this case.
He ruled that it is not possible to deprive the employer of the right to a full VAT deduction where the worker uses a business car for the purpose of driving to work (judge of 20 January 2015, reference no. I SA/Kr 1834/14, invalid).
This judgment may be the beginning of a more favourable case law. The complaint, examined by the Provincial Administrative Court in Krakow, concerns a company whose business is to control and supervise performed orders in the form of distribution of advertising materials. People employed in the company carry out work activities throughout the week, including on weekends. The specificity of the activity requires frequent movement from place to place, which is often even distant from each other A few dozen miles. It is also necessary to respond quickly to identified irregularities and problems. This means that in order for workers to be able to carry out the necessary inspection and supervision activities they must have a car “at hand”. The management of the company decided to introduce a Regulation of Use for Vehicles, which includes a provision for the obligation to park cars in the area of residence. The company took care of the guarantee of the use of vehicles only for business purposes. It therefore included the following provisions in the Rules of Procedure:
- • Prohibition of the use of business cars for purposes other than the performance of duties;
- • Financial penalties and the possibility to terminate a contract with a user who breaks the prohibition on the use of a car for purposes not related to business activity;
- • The staff shall be obliged to draw up vehicle records.
The company also predicted concrete actions it will take to supervise the use of cars. This is, inter alia, an internal check to verify that the employee has carried out the task in accordance with the service instruction. Supervisors will use a mobile phone and e-mail for this purpose. On the other hand, it was imposed on car users to prepare reports or photographic documents of detected irregularities.
Taking into account the state of the art described above, the Provincial Administrative Court in Krakow considered that the above rules for the use of cars were sufficient to enable the full VAT deduction to be used. It is impossible to justify the lack of that right only on the basis of the inability to determine the exact time and place where the car will be used. Especially since this inability is due to the specificity of the business.