Car leasing after changes in VAT from April 1, 2014.
Entrepreneurs who decide to lease a car must take into account the changes that will take place after April 1, 2014 regarding the deduction of VAT on their purchase, settlement of operating costs, including the purchase of fuel. The new regulations will also apply to rental and lease contracts as well as other contracts of a similar nature.
In the amendment to the act on tax on goods and services, the legislator adopted a new legal definition of a motor vehicle, which should be understood as a motor vehicle, the construction of which allows driving at a speed exceeding 25 km / h, other than a farm tractor, and whose permissible total weight does not exceed 3, 5 tons. And a motor vehicle is one that is equipped with an engine, except for a moped and a rail vehicle.
The introduced formula refers directly to the provisions of the Road Traffic Act. The purpose of such a procedure was to eliminate doubts related to the application of regulations relating to vehicles other than passenger cars (e.g. motorcycles or ATVs). The legal status after April 1, 2014 will also apply to this type of vehicle.
Lease agreements concluded until March 31, 2014
The legislator decided to respect the principle of respect for acquired rights. Hence, the Act amending the Act on tax on goods and services of February 7, 2014 contains transitional provisions. Their literal wording shows that a taxpayer who uses a motor vehicle (with a maximum permissible weight of up to 3.5 tons) under a leasing contract concluded before March 31, 2014, will not be able to fully deduct from 1 April 2014. VAT on the invoice for the leasing installment, but only 50%.
However, it will be possible to keep the current 100% deduction if the entrepreneur meets the following conditions:
the motor vehicle must be subject to 100% VAT deduction before April 1, 2014,
the contract was concluded by March 31, 2014, and the deduction is due to the extent that the contract has not changed,
the motor vehicle will be released to the user before April 1, 2014,
The leasing contract will be registered with the competent head of the tax office no later than 30 days from the entry into force of the amendments to the VAT regulations, i.e. by May 2, 2014.
The above conditions apply only to the deduction of leasing installments, in the case of other fees, e.g. service charges, a vehicle mileage record will be needed to fully deduct the vehicle (which will be discussed in more detail).
Attention! Re-registration of the contract!
The situation applies to those taxpayers who concluded car leasing contracts "with a grille", for example in 2010 or 2011, and then registered it with the tax office. If such an agreement stipulates its validity until more than March 31, 2014, then you should go to the office and re-register it from April 1 to May 2, 2014.
Register in person! Do not send by post!
The issue of registering the contract should also be dealt with separately. The time limit for this activity is substantive and not procedural as it might seem. This means that it cannot be exceeded and cannot be extended. May 2, 2014 is the final date for contract registration and must be strictly adhered to.
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Online advice for businessesIn addition, the transitional provisions explicitly indicate that it is the registration of the leasing contract, and not the delivery, which is applicable in the case of postage of documents. This should be interpreted as meaning that a personal (or through a representative) appearance at the tax office will be necessary for this purpose.
Moreover, for prudential reasons, this solution gains in security as opposed to the simple mailing of the contract to the head of the tax office.
Art. 13. 1. In the case of motor vehicles which are the subject of a rental, lease, leasing or other agreement of a similar nature concluded before the date of entry into force of this Act, for which, on the day preceding the date of entry into force of this Act, the amount of input tax was the entire amount of the tax on goods and services shown on the invoice, the provision of art. 86a paragraph 1 of the act amended in Art. 1, as amended by this Act, with regard to the expenditure referred to in Art. 86a paragraph 2 point 2 of this Act, as amended by this Act.
2. The provision of para. 1 applies to the contracts referred to in that provision:
Transitional period and an advance payment for a car
A question should be asked: what about taxpayers who will pay an advance payment for a car and its delivery will take place only after April 1, 2014?
The entrepreneur will be able to deduct the input tax in accordance with the regulations that were in force on the date of receipt of the advance invoice. The full amount of tax can be deducted from the advance payment (provided that the vehicle meets the statutory requirements).
If, after the April changes in the regulations, the taxpayer loses the right to 100% of the deduction, then in the case of receiving the final invoice, only 50% of VAT will be deducted (the regulations will apply at the time of delivery of the vehicle).
Passenger cars before and after April 1, 2014
The situation of taxpayers who used passenger cars before April 1, 2014 and had a limited right to deduct VAT (i.e. 60% but not more than PLN 6,000) is noteworthy. In their case, the legislator did not provide for any transitional provisions.
In practice, this means that if the entrepreneur exceeds the limit of PLN 6,000 before the entry into new regulations, from April 1, 2014, he will be able to deduct 50% of the tax on each invoice for the leasing installment.
50% VAT deduction
The amendment to the act provides for a limited - 50% VAT deduction for both passenger cars and trucks with truck approval - if they will be used both for business and private purposes.
This rule applies to:
leasing installments (except for transitional provisions),
fees for replacing tires, liquids, wipers
maintenance services and,
other maintenance charges.
Good to know!
No amount limits apply up to 50% VAT deduction!
As a rule, the deduction of VAT on the purchase of fuel will not be possible for owners of passenger cars until July 1, 2015. This is due to Poland's request to apply a derogation, to which the Council agreed. The provision in the Council's decision that Poland may apply for an extension of the fuel deduction ban is interesting. The doctrine indicates that expressing the intention to extend the derogation may in practice mean its automatic extension, and the Council does not have to issue a further decision on this matter.
Only those entrepreneurs who use cars with truck type approval (N1) to a limited extent will use the right to deduct - 50%, unless a vehicle mileage record is kept for VAT purposes for this type of vehicle, then 100% of the VAT amount.
It should be added that this right will be used primarily by cars with a grill and N1 - motor vehicles with a maximum permissible weight not exceeding 3.5 tons, other than passenger cars, in which the number of seats or seats, including the driver's seat, is:
1 - if the maximum load capacity is equal to or greater than 425 kg,
2 - if the maximum load capacity is equal to or greater than 425 kg,
3 or more - if the maximum load capacity is equal to or greater than 500 kg.
In addition, the following users will benefit from the 100% deduction:
motor vehicles with more than nine seats, including the driver's seat
motor vehicles with a total weight of more than 3.5 tons, the expenses of which are entirely related to their taxable business activity in accordance with the VAT Act
motor vehicles with a total weight of less than 3.5 tonnes used exclusively for business activities, which:
they are used in a way that excludes even potential use for purposes other than business activities
are subject to vehicle mileage records for VAT purposes
were reported to the tax office on the VAT-26 form within 7 days from the date of incurring the first expenditure
Vehicle mileage record and VAT-26 = 100% deduction from exploitation.
In principle, the vehicle mileage records for VAT purposes entitle to apply the right to full deduction for items other than leasing installments. The necessary condition is the lack of private use of the motor vehicle.
The entity responsible for keeping the records should be the person using or making the vehicle available. What should be included in such a register has been discussed in more detail in a separate article in our Guide.
An interesting fact may be that as part of the vehicle mileage records, in order to validate only the official use of the vehicle, the taxpayer may add to the documentation data resulting from the GPS system. The Ministry of Finance officially confirmed the possibility of collecting the required data in this form. This means that the mileage record can also be kept in the form of entries from the navigation device, if the entries contain all the data required by the VAT Act.
It should be added that the provisions of the VAT Act do not indicate the need to keep separate records in the case of private use of the vehicle, from which the taxpayer deducts 100% of VAT from leasing installments.
Vehicle mileage records for VAT purposes should be kept from the moment of incurring the first, after the entry into force of the "new" regulations, expenditure related to a motor vehicle.
In addition, the entrepreneur should report information about such a vehicle to the competent head of the tax office within 7 days from the date of incurring such an expense. The notification should be made on the VAT-26 form.It may be practical to say that the printout should state the date of handover of the leased car, not the date of purchase.
If the information about a motor vehicle (N1), for which a 100% VAT deduction for fuel is planned, is not submitted to the office, the taxpayer loses the right to deduct 100% VAT in favor of 50% of the VAT amount resulting from the document confirming the cost . 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.
The requirement to keep records of the vehicle mileage does not apply to motor vehicles intended only for use against payment under a rental, lease, leasing or other similar contract, if the use of these vehicles for payment is the subject of the taxpayer's business.