N1 approval counts, not the grille

Many taxpayers remember the times when the purchase of a car from the so-called "Grille", i.e. a vehicle with truck type approval with a maximum load capacity of more than 500 kg, it was possible to deduct the entire input VAT without any problems. However, the situation changed at the beginning of 2011, when the amendments to the Act on tax on goods and services and the Act on road transport entered into force, introducing a limitation in the deduction of VAT on the purchase of vehicles other than trucks (max. 60%, but not more than 6 thousand PLN). These rules, however, were limited in time and expired on January 1, 2014.

Therefore, taxpayers again gained the possibility to deduct 100 percent. VAT on the purchase of a car other than a truck that meets certain requirements. However, this law will disappear from Polish regulations on April 1, 2014. Until then, it is worth remembering which cars are entitled to a full VAT deduction.

Valid truck homologation

Currently (from January 1, 2014 to March 31, 2014), the condition for a full deduction of the tax on goods and services from the price of the purchased (or leased) car is truck approval and load capacity over 500 kg. It might seem that it is enough to install the legendary grille in the car again, thanks to which you will gain the right to a 100% deduction. VAT. Nothing could be more wrong. The current legislation is about the EU N1 approval, and not about the old approval within the meaning of Polish regulations.

N1 approval is a special document issued, among others by vehicle manufacturers. It specifies the technical parameters of the vehicle on issues such as loading capacity and cargo space. The condition for granting it is, inter alia, permanent separation of the passenger and luggage compartment (by means of, for example, a commonly known grille), however, it should be remembered that each producer country determines what this permanent separation is to be. That is why you can meet cars with N1 approval that have a paper partition, others - an iron plate, or a permanently installed shelf.

Therefore, it is important that when buying an imported car, the entrepreneur checks whether the importer has the N1 approval issued by the country where the car comes from.

As for the conditions for loading the goods into the vehicle, this must be possible through specially designed rear doors, a tailgate or a side door. The rear door or hatch should have a height of not less than 600 mm if the vehicle has one row of seats or only the driver's seat, or at least 800 mm high and 12,800 cm2 of the area for a car with more than one row of seats.

The regulations also define conditions for the cargo area, which is the part of the vehicle that is behind the rows of seats. It is important that it is flat and its length is not less than 40%. (with one row of seats or only the driver's seat) or 30% (with more than one row of seats) the wheelbase. Even if one of the rows can be removed easily and without special tools, the space requirements should still be determined when all seats are fitted to the vehicle.

From April 1, 2014, further restrictions

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The above conditions will entitle to a full VAT deduction only until March 31, 2014. As of April 1, new regulations will enter into force, which will limit the settlement of the tax on goods and services on the purchase of vehicles other than trucks with a total weight not exceeding 3.5 tons. According to the amendment to the VAT Act, entrepreneurs who decide to purchase, intra-Community acquisition, import, rental or leasing of a passenger car will be able to deduct a maximum of 50 percent. VAT value.

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The right to deduct 100% from vehicles other than lorries with a maximum permissible weight not exceeding 3.5 tons will be available if the vehicle will be used exclusively for business purposes. In order to determine if this is the case, it will be necessary to keep detailed mileage records of the vehicle (with different data than in the case of the well-known mileage for a private car used in the business).

The new regulations indicate that a motor vehicle can be considered to be used only for business purposes if:

• the manner of its use is additionally confirmed by the mileage records kept by the taxpayer for this vehicle, and excludes their use for purposes not related to the activity, or
• the design of the vehicles precludes their use for non-business purposes or makes their use for non-business purposes irrelevant.

This means that cars with a grill are a thing of the past, because any vehicle can be a company car, regardless of the size of the trunk, load capacity or permanent separation of the passenger and luggage parts.