How to account for the purchase of a car from N1 after April 1, 2014?
April 1, 2014 is one of the most groundbreaking days when it comes to tax changes. Apart from the fact that the provisions on the deduction of VAT on cars will be thoroughly modified, we will also find a new definition of a passenger car in the Personal Income Tax Act. All these changes will have a huge impact on the settlements related to the purchase of N1-approved cars.
Purchase of a car with N1 - VAT
When purchasing a car with N1 approval from April 1, 2014, taxpayers must remember that depending on the scope of use of this type of vehicle, they will be able to deduct 50% or 100% of the input VAT resulting from the purchase invoice.
For the purposes of this article, an N1 homologated car means:
motor vehicles in which the number of seats (seats), including the driver's seat, is:
and the permissible load capacity of the vehicle and the number of seats (seats) is determined on the basis of documents issued in accordance with the provisions of the road traffic law.
In a situation where the car will be used for both private and business purposes, the taxpayer will be able to deduct only 50% of the tax on its purchase. On the other hand, if the entrepreneur will use it only for business purposes, the purchase will, in principle, be entitled to a 100% deduction of VAT.
However, in order to make a full deduction of the input tax, the taxpayer must report the car to the tax office. The appropriate form will be VAT-26, i.e. information on motor vehicles used exclusively for business activities. The taxpayer may deliver it in person by visiting the appropriate branch of the office, or by e-mail. As far as the second option is concerned, it should be emphasized that the regulation providing for such an option is at the draft stage and it is not known whether it will enter into force soon enough to improve the activities of taxpayers.
The VAT-26 declaration must be submitted within 7 days from the date on which the first expenditure related to the vehicles subject to reporting will be incurred.
In the event that information about cars below 3.5 tons with N1 approval, from which the taxpayer plans 100% VAT deduction, is not submitted to the Tax Office, he loses the right to deduct 100% VAT for the benefit of 50% of the VAT amount resulting from the invoice.
If the application is submitted after the deadline, it is possible to fully deduct VAT only from the day the information is delivered to the office.
Taxpayers using motor vehicles up to 3.5 tonnes for business purposes, which have been reported to the tax office, will be required to keep a vehicle mileage record.
To sum up, registering a company vehicle at the tax office and keeping records allows for full deduction of input VAT both on operating expenses (service, purchase of parts, parking, etc.) and on fuel purchases.
In the case of cars with N1 approval, but not reported to the tax office, the taxpayer will be able to deduct only 50% of VAT from invoices documenting the purchase of fuel and other operating expenses (the so-called 3 x 50%). In this case, the taxpayer is not required to keep a vehicle mileage record for VAT purposes.
The Act of February 7, 2014 amending the Act on tax on goods and services and certain other acts in the Fiscal Penal Code adds the provision of Art. 56a. According to its wording, a taxpayer who, contrary to his obligation, does not submit to the competent head of the Tax Office information about vehicles used only for the purposes of the activities for which he must run EPP, or submits it late or provides data in it inconsistent with the actual state, deducting the tax inconsistently with the provisions on tax on goods and services, is punishable by a fine of up to 720 daily rates.
In the case of a minor offense, the perpetrator is subject to a fine for a tax offense.
Car with N1 - PIT
As of April 1, 2014, the definition of a passenger car for income tax has also changed. Pursuant to Art. 5a point 19a of the PIT Act, a passenger car should be understood as a motor vehicle within the meaning of road traffic regulations with a maximum permissible weight not exceeding 3.5 tons, designed for the transport of no more than 9 people, including the driver, with the exception of:
a) a motor vehicle with one row of seats, which is separated from the part intended for the carriage of goods by a wall or a permanent partition:
classified on the basis of road traffic regulations into the following subtype: multi-purpose, van or
with an open part intended for the transport of loads,
b) a motor vehicle with a driver's cabin with one row of seats and a body intended for the carriage of loads as structurally separate elements of the vehicle,
c) a special vehicle, if the documents issued in accordance with the road traffic regulations show that the vehicle is a special vehicle, and if the conditions contained in separate regulations, specified for the following purposes, are also met:
- electric / welding aggregate,
- for drilling work,
- excavator, backhoe-bulldozer,
- a hoist for maintenance and assembly works,
- truck crane,
d) a motor vehicle specified in the regulations issued on the basis of art. 86a paragraph 16 of the amended act on tax on goods and services.
Income tax - is the invoice important?
Importantly, the fulfillment of the above requirements must be properly documented by the taxpayer, as provided for in Art. 5d of the PIT Act.
Art. 5d of the PIT Act
Fulfillment of the requirements for motor vehicles specified in:
1) art. 5a point 19a lit. a and b is found on the basis of an additional technical examination carried out by the regional vehicle inspection station, confirmed by a certificate issued by this station and the vehicle registration certificate containing the appropriate annotation about the fulfillment of these requirements;
2) art. 5a point 19a lit. c it is concluded on the basis of documents issued in accordance with the road traffic regulations.
As can be seen, these regulations are not as clear as in the wording in force until March 31, 2014. Their content does not directly indicate whether a car with N1 approval should be treated as a passenger car or a truck for income tax purposes. This is extremely important, especially in terms of depreciation.
On the other hand, according to the Road Traffic Act, cars with N1 approval are considered lorries.
A car that meets the requirements set out in Art. 5a point 19 of the PIT Act and in the light of the provisions contained in the discussed article, it is not an exception, it is considered a passenger car under the PIT Act. In connection with the above, the taxpayer qualifies such vehicles for the register of fixed assets as passenger vehicles, assigning them to group 741 according to the KŚT. Importantly, their depreciation should be made in accordance with the regulations for this type of vehicle.
A car recognized as a passenger car in accordance with the provisions of the PIT Act may not be depreciated once.
On the other hand, when a car with N1 approval does not meet the definition of a passenger car, it should be considered a truck for PIT purposes with all its consequences.