Will the sale of a company car in 2014 be exempt from VAT?


From January 2014, new VAT regulations will apply. Taxpayers are already starting their preparations for the changes that the tax authorities have prepared for them and are wondering what the issue of taxing the sale of cars used in business activities with VAT will look like.

The sale of corporate assets will be subject to VAT

Until the end of 2013, an entrepreneur who is an active VAT taxpayer may apply a VAT exemption for the sale of corporate assets used for a minimum period of six months, from the acquisition of which he was not entitled to deduct VAT (Article 43 (1) (2) of the Act on VAT).

On the other hand, according to the new regulations in force from 2014, the taxpayer will be able to apply the exemption only for the supply of goods used solely for the purposes of tax-exempt activities, if the supplying party was not entitled to deduct VAT due to the purchase, import or manufacture of these goods.

Car sale in 2013

In the case of selling a car, be it a truck or a passenger car, which has been used for a period of at least six months, on the acquisition of which the taxpayer did not have the right to deduct VAT, it is obvious that this transaction will benefit from VAT exemption.

The right to deduct VAT is not payable in situations where the car was purchased on the basis of a purchase and sale contract, a margin VAT invoice or a bill issued by a non-vat.In addition, the exemption is also available to entities where the purchase of the car was documented by an invoice, but at the time of introducing it to the company, they were not active VAT payers, and therefore had no right to deduct the tax.

What about cars for which the taxpayer was entitled to a partial VAT deduction? Well, the issue of taxing this type of transaction was explained in par. 13 sec. 1 point 5 of the Regulation of the Minister of Finance of April 4, 2011 on the implementation of certain provisions of the Act on tax on goods and services. Pursuant to its content, the VAT exemption may be granted to the supply of passenger cars and other motor vehicles by taxpayers who had a partial right to deduct the tax amount when purchasing these cars and vehicles:

  • specified in the invoice or
  • resulting from the customs document, taking into account the amounts resulting from the decisions referred to in article 1. 33 paragraph 2 and 3 and article. 34 of the Act, or
  • due for intra-Community acquisition of goods, or
  • due on the supply of goods for which the taxpayer is the buyer

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- but not more than PLN 5,000 or PLN 6,000, respectively, if these cars and vehicles meet the definition of second-hand goods (second-hand goods in accordance with Article 43 (2) of the Act are movable property, the period of use of which by the taxpayer who supplies them was at least half one year after acquiring the right to dispose of these goods as owner).

On the other hand, taxpayers who deducted the full amount of VAT from the purchased car must tax its sale at the standard rate of 23% VAT.

Car sale in 2014

Due to the new wording of Art. 43 sec. 1 point 2 of the VAT Act, most of the taxpayers selling company cars would have to tax this type of transaction at the basic rate, ie 23% VAT.

Due to the fact that the regulation on the implementation of certain provisions of the VAT Act loses its legal force as of December 31, 2013, the Ministry of Finance is preparing new regulations for its taxpayers. In the draft regulation on exemptions from tax on goods and services and the detailed conditions for the application of these exemptions, we find regulations exempting from VAT the supply of passenger cars and other motor vehicles, on the purchase of which the taxpayer was entitled to deduct 60% (or 50%) of the tax amount, not more than PLN 6,000 (or PLN 5,000, respectively). Currently, there is a similar exemption, but it only applies to used cars, i.e. cars used for a period of at least 6 months. The new regulations do not mention any time conditions, which means that the taxpayer will be able to take advantage of the VAT exemption for the sale of a car, on the purchase of which he made a partial tax deduction (but not more than PLN 6,000), regardless of the period its use.

In the justification to the project you can read: "(...) it should be emphasized that ultimately the issue of taxation rules for the supply of used cars, with respect to which there was a limited right to deduct input tax, will be regulated by a new legislative proposal in connection with the implementation work, a derogation decision on cars.".

The proposed changes relating to the exemption from VAT of sales of cars, on the purchase of which the entrepreneur made only a partial deduction of VAT, are not certain changes. Therefore, taxpayers in this matter should consider all possible scenarios.