New tax for private use of the car

The Ministry of Economy proposes to introduce a new tax that will burden the pockets of employees. A flat rate will be charged for private use of a company car.

Lawmakers noticed that in Poland there are about 800,000 company vehicles. Employees use cars not only for company purposes, but also for private purposes. They go on vacation, shopping or picking up a child from kindergarten. A fairly common view on Polish roads are company vehicles covered with company advertisements, along with a child seat inside. Employees should pay tax on the use of the car for private purposes. They earn income because their private car would otherwise be used. However, only a small fraction of the workforce is actually charged.

Currently, it is assumed that the valuation of the benefit received by an employee for the private use of a company car should be based on the cost of renting the same vehicle from a car rental company and this value should constitute the taxable amount. In addition, today's method of settlement requires keeping records of travel by a company car for private purposes, which is very onerous.

The lack of precise and simple regulations in this area currently makes it difficult to account for the use of the vehicle and favors the non-disclosure of such an activity for tax purposes. So the so-called Gray zone.

The draft assumptions of the act on facilitating the conditions for conducting business activity (i.e. the so-called fourth deregulation act) include, inter alia, provision on flat-rate settlement of used vehicles. The basis for calculating the lump sum would be the multiple of the kilometer rate. The proposal simplifies the current rules for the billing of such use. However, the lump sum will not cover contractually regulated situations, e.g. through a vehicle lending or rental agreement. This is because this means the application of general taxation rules.

The Ministry of Economy also points out that in the reverse situation, i.e. the use of a private vehicle for business purposes, employees are paid an equivalent in the form of a lump sum. Hence, the taxation of benefits will be analogous and fair.

Simplification of the taxation rules will certainly allow to increase the number of employees burdened with the tax, and thus increase revenues to the state budget.