Deduction of 50% VAT on fuel for passenger cars - tax supervision

The counter status is periodically controlled, e.g. during technical inspections. The tax authority may compare the vehicle's mileage and average consumption with the actual fuel costs. This is to prevent VAT deduction and inclusion in costs of expenses that do not relate to the vehicle, e.g. invoices collected from friends or family.

The tax authority has an easier task in the case of inspecting entrepreneurs who use private cars for business. They are obliged to keep records of the vehicle mileage in order to settle the costs. Thus, the number of kilometers traveled is known and it is possible to estimate the amount of fuel that the entrepreneur could actually use for business purposes, and what amounts result from the booked invoices. In case of a clear discrepancy that cannot be justified, it may be necessary to correct VAT on invoices that are not related to business trips. From 1 July 2015, entrepreneurs who use passenger cars for mixed purposes may apply a 50% VAT deduction on fuel. This law results from tax regulations, but the tax office has already announced inspections in this area. Read the article below and find out what to look for!

Deduction of 50% VAT on fuel - regulations

As of April 1, 2014, the legislator introduced changes to VAT deductions from expenses related to the purchase of a vehicle and its operation. In the case of passenger cars in mixed use (i.e. in business, but also with potential private use), 50% VAT can be deducted. In addition, in the period from April 1, 2014 to June 30, 2015, these vehicles were forbidden to deduct VAT on the purchase of motor fuels, diesel oil and gas used for propulsion:

1. passenger cars;

2. other than passenger cars, motor vehicles with a maximum permissible weight not exceeding 3.5 tonnes, in which the number of seats (seats), including the driver's seat, is:

a) 1 - if the maximum load capacity is less than 425 kg,

b) 2 - if the maximum load capacity is less than 493 kg,

c) 3 or more - if the maximum load capacity is less than 500 kg.

used for mixed purposes.

Currently (from July 2015), it is possible to deduct 50% VAT on fuel.

Important! For fuel purchases made from 1 July 2015, a 50% VAT deduction is due on fuel. If the entrepreneur is in possession of an invoice issued after July 1, but for a purchase made by June 30, 2015, the previous regulations will apply. Thus, the entrepreneur will not be entitled to deduct VAT on fuel.

Announcement of the tax office in connection with the deduction of VAT on fuel

The right to deduct 50% VAT on the purchase of fuel took place on 1 July 2015. This date was known from the moment of establishing the transitional period and long awaited by entrepreneurs.

In June 2015, the Ministry of Finance issued an announcement on its website with a reminder that the provisions introduced by Article 12 of the Act of February 7, 2014 amending the Act on Value Added Tax and Certain Other Acts (Journal of Laws, item 312) expire a complete ban on deducting VAT on fuel purchases for mixed purposes.

At the end of the announcement, however, a "reminder" was added that the condition for deducting 50% VAT on the purchased fuel is compliance of the purchase with the actual state. The amount of fuel purchased should be reflected in the mileage of a given vehicle.

Additionally, there was a warning that the issue of the actual use of fuel for the car on the basis of booked invoices will be subject to control activities by tax authorities.

What will the tax authorities control?

The deduction of 50% VAT on fuel means that the passenger car can be used partly for private purposes. In the case of company cars (fixed asset or in the operating lease agreement), the entrepreneur is not obliged to keep any records of the vehicle mileage, even for the purposes of cost settlement. So how to understand the words MF regarding the control of the actual use of the vehicle for company purposes and the reflection in the mileage of the vehicle?

Entrepreneurs will not be required to run additional kilometers - this is the idea behind the deduction of 50% VAT. On the other hand, the tax office can check whether the fuel expenses are not abnormally high in relation to the possible average fuel consumption according to the manufacturer's standards (additionally dependent on the area in which the vehicle is used, ambient temperature or load).