By May 2, submit a car leasing contract with approval to the office

The most frequently discussed topic among accountants and entrepreneurs in recent times are the changes in the deduction of VAT on the purchase of cars and the costs of their operation, which come into force on April 1.

The new regulations will allow, inter alia, to:

• 50% deduction of the amount of VAT on expenses related to the purchase of the vehicle and related to its operation (except fuel), in a situation where the taxpayer will use the vehicle both in business and privately;

• 100% deduction of the VAT amount from the above-mentioned expenses in the case of vehicles used exclusively in the business activity conducted by the taxpayer.

This issue is discussed in detail in our Guide in the article on leasing.

The full deduction of VAT, after the changes from April 1, was required by the legislator to submit information by the taxpayer to the tax office (VAT-26), as well as the requirement to keep a record of the vehicle mileage.

VAT deduction on leased cars

The above regulations also apply to used cars under a leasing contract.

However, it should be remembered that the new regulations in force from April 1, 2014 will not apply to cars that are the subject of a rental, lease or leasing agreement or any other agreement of a similar nature that was concluded before April 1, 2014. This means that in the case of cars for which, as at March 31, 2014, the taxpayer deducts the entire input VAT indicated on the invoice, the provisions in the new wording will not apply. Therefore, even after April 1, 2014, taxpayers will be able to deduct the entire VAT shown on lease invoices under the following conditions:

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• for the car owned, before April 1, 2014, the right to a full VAT deduction was made;

• the leasing contract was concluded by March 31, 2014, and the deduction is due to the extent that the contract has not changed;

• the car was handed over to the user before April 1, 2014;

• the taxpayer registered the contract with the competent tax office.

Time to register the contract

The concluded lease agreement should be registered by the taxpayer with the competent tax office no later than 30 days from the date of entry into force of the amendment to the VAT Act, i.e. by May 2, 2014.

It should be remembered that the right to fully deduct VAT from leasing installments does not mean that it is possible to fully deduct VAT from other expenses related to the operation of the car. New regulations will apply here.