The July ruling of the Supreme Administrative Court gives taxpayers the hope that they will not have to pay fuel tax to a business car used privately as well. Maybe even get a refund. An entrepreneur who entrusts his employees with cars for business purposes must take account of the tax consequences. The PIT covers not only employee remuneration but also allowances, prizes and benefits received free of charge from the employer.
Tax settlements may be complicated if someone obtains a car for business purposes but uses it also privately – then the employee receives a taxable benefit free of charge. Here's the question: should we pay a fuel tax for this car? Employers and workers would, of course, like the value of fuel not to increase the tax base, but the tax offices differ.
NSA judgment of 10 July (reference no. II FSK 1185/16) hopes that the fierce dispute will be concluded for the benefit of taxpayers, i.e. they will no longer have to pay a fuel value tax for a business car also used for private purposes. Moreover, there is a real prospect of seeking a refund of overpaid tax.
Possible break after NSA judgment
The use of a business car for private purposes by an employee is subject to flat-rate taxation. If the engine has a capacity to 1600 cm3 is the value of the unpaid taxable benefit taken in the amount 250 PLN A month. For engines of a capacity greater than 1600 cm3 amount increases to 400 PLN. Employers, as contributors to the PIT advance, argued that these amounts (250 and 400 PLN) include any charges related to the use of the vehicle (including fuel).
The tax authorities defended the position that flat-rate amounts relate to car insurance expenditure or the replacement of shock absorbers, and fuel is a separate category that increases the tax base.
Administrative courts took a position in this dispute beneficial to taxpayers some time ago. For example: the sentence of the WSA in Opole with 6 May 2016 (reference no. I SA/Op 68/16). However, all favorable rulings were given by the Provincial Administrative Courts. It wasn't enough to break the IRS' resistance.
NSA judgment is not first a ruling in this direction, but one can hope for a positive breakthrough due to the rank of this court. The Supreme Administrative Court, as its name suggests, is at the very top of the hierarchy in judicial proceedings concerning taxes.
Consequence
The most obvious consequence of the NSA judgment can be tax savings. The additional benefit is considerable simplification in the accounts. This in turn may reduce the fee for the accounting office or relieve the internal accounting department. A separate issue is the possibility of applying for a refund of overpaid tax.
However, it should be taken into account that the NSA judgment offers great opportunities, but does not automatically change anything. The power of the judgment is a matter which distinguishes the legal system of continental Europe (including Poland) from the Anglo-Saxon countries.
In countries such as the US, the judgment of a court is a precedent that binds the courts of the lower level in other cases. Continental Europe has adopted the principle that a judge is subject only to legal provisions. Court rulings in other cases are an indication, but they don't oblige anything.
The NSA ruling will not become formally binding either for the Provincial Administrative Courts or for tax authorities. However, it can be hoped that tax authorities will agree with the NSA's legal view or at least, for fear of losing in court, they will not question taxpayers' settlements against the NSA's judgment.
Source: Forbes
Author:
Andrzej Dmowski
Managing Partner Russell Bedford, Doctor of Legal Sciences, Lawyer, Tax Advisor, Restructuring Advisor, Certified Public Accountant – Expert Auditor in Ireland, Certified Fraud Examiner - Expert in Crime Detection and Abuse, Certified Internal Controls Auditor - International Internal Auditor.
Graduate of the University of Cambridge - British Centre for English and European Legal Studies - Faculty of Law and Administration, Graduate and Fellow of the Faculty of Law and Administration of the University of Warsaw.
Specializes in settlement of transactions between related entities - transfer pricing, legal and tax aspects of M&A and issues concerning derivatives of financial instruments.