VAT correction - change in the use of the vehicle
As of April 1, 2014, the amended VAT Act sets out new rules for deducting input tax on passenger cars. A very important change is the addition of Art. 90b, which imposes new obligations on entrepreneurs. They concern the necessity to prepare an adjustment of the input tax in a situation where they purchased a passenger car or other vehicle with a permissible total weight not exceeding 3.5 tons (excluding vehicles designed to transport at least 10 people) and made changes to its use. The method of correcting the input tax depends on the right to deduct VAT.
Vehicles with the right to 100% deduction VAT
In a situation where the entrepreneur uses the purchased passenger car only for purposes related to business activity, as proof of which he keeps a mileage allowance for VAT purposes, he reported the vehicle in question on the VAT-26 form and established the regulations for the use of the car in the company, then he has the right to deduct 100 percent. VAT on its acquisition and operating expenses related to it. However, if within 60 months from the date of purchase of the car, it changes its intended use, then it will be obliged to reduce the tax deducted accordingly.
Vehicles with the right to a 50% deduction VAT
A taxpayer may also use a vehicle in the course of his activity, for which he is entitled to a 50% VAT deduction (e.g. he does not keep records of the vehicle's mileage for VAT purposes). Also in this case, if, within 60 months, he makes a taxable sale of such a car or changes its use to be used exclusively for business purposes, he will be able to make an appropriate VAT adjustment. In this case, it will be possible to increase the deductible VAT in proportion to the remaining correction period. This means that the value of the correction depends on the moment when the entrepreneur changed the intended use of the car.
|
Attention! Motor vehicles with an initial value of up to 15,000 PLN are subject to the said adjustment within 12 months from the date of purchase. |
Importantly, the correction system cannot be used in the case of purchasing passenger vehicles before the effective date of the aforementioned act. The only exception is the sale of such cars.
Rules for calculating the correction period
The adjustment period (both 60 and 12 months) is counted from the date of purchase or import. In a situation where the taxpayer makes the above-mentioned changes to the purpose of the car after the end of the correction period, he will no longer be able to correct the deducted tax on goods and services.
|
Example 1. A car above the value of PLN 15,000 In April 2014, the entrepreneur purchased a car worth PLN 24,600. This vehicle is used only for business purposes, therefore the taxpayer has the right to fully deduct VAT from the purchase, which he will make in the declaration for April 2014, submitted by May 25, 2014. We assume that in October 2014 the entrepreneur will change his decision and will also use this vehicle for private purposes. The VAT deduction for April 2014 will be as follows: Car invoice:
VAT deduction in April 2014: PLN 4,600. Correction of the deducted VAT in October 2014: PLN 4,600 x 50% = PLN 2,300. The taxpayer should correct the tax in the VAT declaration for October 2014, and the amount of the correction should be entered in box 43 of the VAT-7 declaration with a minus sign.
|
The same will be the correction of VAT on a car with an initial value of less than 15 thousand. PLN, if its owner resigns from the full VAT deduction in favor of a 50% deduction.
|
Example 2. A car above the value of PLN 15,000 In April 2014, the entrepreneur purchased a car worth PLN 30,750. He assumed that it would be used for both private and business purposes, and therefore would have a 50% right to deduct input VAT. We assume that in November the taxpayer decides to use the purchased vehicle only for company purposes. Such a procedure will allow him to correct the not fully deducted VAT on the purchased car. Adjustments of the deducted VAT will have to be made in proportion to the remaining periods possible to be adjusted. In his case, it would look like this: Correction period: 60 months Month of purchase: April 2014 Decision change month: November 2014 Remaining periods to be adjusted: November 2014 to October 2019, i.e. 53 months In the declaration for April 2014, he made a deduction of VAT on the car in the amount of: 2,875 = 5,750 x 50% Corrections from November 2014 to October 2019: PLN 2,875: 60 months = PLN 47.92 - monthly correction amount PLN 47.92 x 53 months = PLN 2,539.76 - total sum of corrections |
|
Example 3. A car below the value of PLN 15,000 (change of VAT deduction from partial to full) In April 2014, the taxpayer purchased a car worth PLN 14,760. He will use this car for both business and private purposes. In September, the taxpayer will decide that the car will be used only in business activities, and therefore will be able to correct the VAT deducted in April on the invoice for the purchase of the car:
In the case of a car worth less than PLN 15,000, the taxpayer has the right to correct the VAT for 12 months from the date of purchase. In this situation, the taxpayer will be able to make adjustments until March 2015. VAT deducted in April 2014 - PLN 1,380 = PLN 2,760 x 50% Corrections from September 2014 to March 2015: PLN 1,380: 12 = PLN 115 - the value of the monthly adjustment PLN 115 x 7 = PLN 805 - total value of corrections |
Special cases of use of the vehicle
The discussed system of corrections does not apply to cars purchased under operating lease, rental, lease and other similar contracts. This is due to the fact that expenses from this type of long-term contracts are settled monthly, therefore it is possible to verify the deduction of the tax on goods and services on a regular basis, i.e. in the month of changing the destination of the vehicle.
However, if the taxpayer also uses the vehicle for exempt activities (mixed sales), in the event of a change in its intended use, it may make an appropriate adjustment, taking into account the proportion established for the deduction of input VAT.
