VAT deduction for cars from April 1, 2014
Changes in the scope of deducting VAT on the purchase of vehicles and costs related to their operation, which entered into force on April 1, 2014, emphasize the distinction between cars used exclusively for business purposes and those used also privately. It turns out that for many entrepreneurs the decision to which group to classify their vehicle may seem more difficult than initially assumed. Below we present a short guide to changes in the tax on goods and services, which will help you correctly settle VAT on cars after April 1, 2014.
Three vehicle groups from April 1
From April 1, 2014, in connection with the amendment to the VAT Act, cars used by entrepreneurs are divided into three groups:
-
group I - vehicles from which the taxpayer can deduct 100% VAT without the need to prove that it is used only in business,
-
group II - vehicles from which the taxpayer will deduct 100 percent VAT and which require the fulfillment of several additional conditions to prove that the car cannot even potentially be used for purposes other than the business,
-
group III - vehicles entitling to a deduction of 50 percent VAT, where the taxpayer assumes in advance that they can be used for other purposes and activities (here, no additional reporting or registration obligations are imposed on entrepreneurs).
As for group I - whether a given vehicle belongs to it is determined by its technical parameters and the documents or certificates that confirm them (we will look at them in detail later in the article). Groups II and III, however, include the same categories of vehicles, therefore it depends on the decision of the taxpayer himself to which one a given car should be classified.
Cars from group I - 100% deduction VAT without additional obligations
The amended Act on VAT lists vehicles that, due to their design, cannot be used for purposes other than the business. Accordingly, in order to deduct 100 percent. tax on goods and services on the acquisition of these cars and operating costs, the taxpayer does not have to meet any additional registration or registration obligations. It is only important that he has documents and certificates regarding the technical parameters of the car obtained, among others from the district vehicle inspection station.
Below is a table listing the vehicles from group I and the right to deduct VAT on their purchase, operating expenses and fuel.
|
Vehicle |
Required parameters |
VAT deduction on purchase |
Deduction of VAT on expenses - service, parts, car wash |
Deduction of VAT on fuel |
|
Truck |
gross vehicle weight over 3.5 tonnes |
100% |
100% |
100% |
|
Motor vehicles of the type: a) van b) multitasking c) with the loading section open |
|
100% |
100% |
100% |
|
Motor vehicles other than passenger cars |
|
100% |
100% |
100% |
|
Special vehicles: a) electric / welding aggregate, b) for drilling work, c) excavator, backhoe-bulldozer, d) charger, e) a lift for maintenance and assembly works, f) truck crane |
in accordance with the requirements of the Road Traffic Act, confirmed in vehicle documents |
100% |
100% |
100% |
|
Moped |
|
100% |
100% |
100% |
One should also pay attention to one more "subgroup" of cars, from which the taxpayer can deduct 100 percent. VAT. We are talking about vehicles that the entrepreneur purchases in order to:
- resale,
- sales, in the case of vehicles manufactured by the taxpayer,
- handing over for use on the basis of a rental, lease, leasing or other similar agreement
- if the resale, sale or use of these vehicles for consideration is the subject of the taxpayer's business.
Cars from group II - 100% deduction VAT upon fulfillment of additional obligations
Groups II and III include vehicles that are the same in terms of technical parameters. It is the taxpayer himself who decides which one a vehicle will be classified for by indicating whether the car will be used exclusively for business purposes or also privately. Vehicles from group II, i.e. only "company" ones, give the right to deduct 100 percent. VAT provided:
- submission of VAT-26 form to the office,
- keeping a detailed mileage test for VAT purposes,
- establishing the exact rules of using the vehicle in the company (e.g. by creating regulations).
Thanks to all these measures, the entrepreneur will be able to prove that the vehicle is used exclusively in business activities. Importantly, according to the explanations of the ministry, it should be recognized that it is important to exclude even the potential possibility of using the vehicle for purposes unrelated to the company being run. In connection with the above, the doubts of tax authorities regarding the legitimacy of deducting 100 percent. VAT on a car classified as group II may arise, for example, when the entrepreneur runs business in his own apartment and owns one car, which is a fixed asset in his company.
We recommend
WNT - invoice received late and VAT 2014
Below is a table listing the vehicles from group II and the available deduction of input VAT on their acquisition, operating expenses and fuel.
|
Vehicle |
Additional parameters |
Deduction of VAT on the purchase of a car |
Deduction of VAT on expenses - service, parts, car wash |
Deduction of VAT on fuel |
|
Car |
gross vehicle weight less than 3.5 tonnes |
100% |
100%
|
100%
|
|
Motorcycle, scooter |
|
100% |
100%
|
100%
|
|
Automobile vehicle |
|
100%
|
100% |
100%
|
|
Automobile vehicle |
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; |
100%
|
100% |
100%
|
|
Other motor vehicles, which do not meet the parameters of Art. 86a paragraph 9 and cannot be classified as structurally intended for business purposes only |
gross vehicle weight less than 3.5 tonnes |
100%
|
100% |
100%
|
Cars from group III - 50% deduction VAT without additional obligations
The entrepreneur may also waive the right to 100% deduction. VAT for 50%There can be many reasons - taxpayers may be afraid of excessive bureaucracy and the approach of tax offices to new regulations.
In such a case, the car should be classified as belonging to the III group of cars. Importantly, the remaining (not deducted) 50 percent. As a rule, VAT will constitute a tax deductible cost (i.e. it will be included in the calculation of the income tax advance). As indicated in art. 23 sec. 1 paragraph 43, the tax cost is: input tax
Online Tips
Do you run a company and have questions?
Take advantage of the expert advice of the Entrepreneur's Guide
Online advice for businesses
(...) - in the part in which, in accordance with the provisions on tax on goods and services, the taxpayer is not entitled to a reduction in the amount or refund of the difference in tax on goods and services - if the input tax on goods and services does not increase the value of a fixed asset or intangible asset and legal.The table below lists the cars that give the right to a 50% deduction. VAT on their acquisition and operating costs. Particular attention should be paid to the lack of the right to deduct VAT on invoices documenting the purchase of fuel for such vehicles until June 30, 2015).
|
Vehicle |
Additional parameters |
Deduction of VAT on the purchase of a car |
Deduction of VAT on expenses - service, parts, car wash |
Deduction of VAT on fuel from April 1, 2014 until 30/06/2015 |
Deduction of VAT on fuel after 1 July 2015 |
|
Car |
gross vehicle weight less than 3.5 tonnes |
50% |
50%
|
Lack
|
50%
|
|
Motorcycle, scooter |
|
50% |
50% |
Lack
|
50%
|
|
Automobile vehicle |
|
50%
|
50% |
50%
|
50%
|
|
Automobile vehicle |
-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; |
50% |
50% |
Lack |
50% |
The amendment to the VAT Act and the changes introduced through it are important for virtually all entrepreneurs who use cars in their activities. Therefore, as soon as possible, they should decide which of the discussed groups they include the car used in their company. Depending on the qualifications of a given vehicle, entrepreneurs will be required to:
Online Tips
Do you run a company and have questions?
Take advantage of the expert advice of the Entrepreneur's Guide
Online advice for businesses
- make sure that the technical examinations are up to date (if the vehicle cannot be used for purposes other than those related to the activity due to its design),
- report the car to the office and keep mileage allowance for VAT purposes (if your car will be used only for business purposes),
- remember to change the rules for deducting VAT on operating expenses (from 100 to 50 percent) when deciding to use the car mixed.
