VAT tax 2014 (part 6) - VAT tax in the settlement of cars in 2014.
From January 1, 2014, cars became extremely loud, especially in terms of taxation. Due to the changes in the Act on tax on goods and services (VAT), entrepreneurs gained the opportunity to deduct the tax to a greater extent than before. However, most likely - not for long. What regulations are in force now, and which will apply in the near and distant future?
From January to March, "Yes" to cars with grille and more
The basic principle of accounting for VAT on the purchase or leasing of a car allows it to be fully deducted only if the transaction concerns trucks. In the case of passenger cars, however, you have to comply with the statutory restrictions.
Meanwhile, many entrepreneurs remember the times when VAT in the full amount could also be deducted from cars from the so-called "Grid" - that is, those with a total weight less than the aforementioned 3.5 tons. In 2009, the European Court of Justice ruled that Polish regulations introducing limitations in VAT deduction are inconsistent with EU regulations. The Polish government decided to apply for permission to apply in the country rules different from those generally prevailing in the Community. The application was accepted and the first derogation decision was issued in this respect - according to it, when purchasing a car other than a truck, the taxpayer had the right to deduct only 60% of VAT, but not more than PLN 6,000. The decision remained valid until the end of 2013.
In connection with the above, from 1 January 2014, Polish entrepreneurs no longer apply specific regulations regarding VAT on motor vehicles. Although the Polish government applied to the European Commission for renewed permission to apply restrictions deviating from the EU, it did so too late. The Commission did not manage to issue a decision early enough to apply it in the country from January 1, 2014. Thus, until this decision is introduced into the Polish law, taxpayers can exercise the right to deduct VAT in the full amount on cars with N1 truck approval.
What does N1 truck approval mean? It is a document issued, inter alia, by vehicle manufacturers, in which the technical parameters of the vehicle are specified. Therefore, in order for a car, the total weight of which does not exceed 3.5 tonnes, to be considered a truck, it should meet the conditions regarding the load capacity and the number of seats. Pursuant to Art. 86a paragraph 2 points 6 of the VAT Act, in order to be entitled to a 100% VAT deduction, such vehicle approval must contain information characterizing a given car as having (including the driver's seat):
1 seat - with a maximum load capacity equal to or greater than 425 kg, or
2 seats - and a maximum load capacity equal to or greater than 493 kg, or
3 or more seats - and a maximum load capacity equal to or greater than 500 kg.
Meanwhile, as already mentioned, the Polish government applied - although with a delay - for re-authorization to apply the restrictions on VAT settlements on motor vehicles. Regulations in this matter will enter into force on April 1, 2014.
50% tax or vehicle mileage records for fixed assets
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Online advice for businessesThe decision of the European Council, although not yet incorporated into Polish regulations, has already been issued. It authorizes Poland to specifically settle VAT on the acquisition and use of motor vehicles.
Polish taxpayers who decide to purchase, intra-Community acquisition, import, rental or leasing of a passenger car will, in principle, be entitled to deduct VAT in 50% of its value (of course, the condition is to have the status of an active VAT payer and use the car for taxable activities) . However, such a limit will not be obligatory - entrepreneurs will also be able to deduct 100% VAT on the purchase of a car - if the vehicle will be used solely for business purposes. Good news, which unfortunately has a trap. Because in order to be able to consider the vehicle as used only by the company, it will be necessary to enter a vehicle mileage record for it - commonly known as the mileage record - previously associated with income tax and only with private cars used for business purposes. The act assumes that the full VAT deduction will be due only in the case of expenses related to vehicles used by the taxpayer exclusively for business activity. It will additionally require submitting information about these vehicles to the tax office and keeping detailed records of the vehicle mileage.
The obligation to document journeys with a company fixed asset in the vehicle mileage register results from the explanation of the legislator. According to it, a car used exclusively for business purposes can be considered a car if:
the manner of its use is additionally confirmed by the taxpayer's mileage records, and excludes its use for purposes not related to the business, or
its design precludes their use for non-business purposes or makes their use for non-business purposes irrelevant.
The legislator also specifies what a construction excluding use for purposes not related to economic activity means. Therefore, according to the regulations, such vehicles, the design of which determines their use for company purposes, can be considered as:
motor vehicles, other than passenger cars, with one row of seats separated from the part intended for the carriage of goods by a wall or a permanent partition:
classified under the provisions of the road traffic law to a subtype of multi-purpose, van, or
with an open part intended for the transport of loads,
motor vehicles, other than passenger cars, with a driver's cabin with one row of seats and a body intended for the carriage of loads as structurally separate elements of the vehicle,
special vehicles that also meet the conditions contained in separate regulations, specified for the following purposes:
electric / welding aggregate,
for drilling work,
a hoist for maintenance and assembly works,
if the documents issued in accordance with road traffic regulations indicate that the vehicle is a special vehicle.
However, in order for a vehicle to be considered a motor vehicle that meets the above conditions and thus gives the owner the right to deduct the full value of VAT, compliance with the technical requirements must be carefully documented. A technical examination carried out by a district vehicle inspection station and confirmed by a declaration and annotation in the registration certificate is appropriate in this case.
However, special vehicles should have appropriate documentation issued on the basis of the provisions of the Road Traffic Act.
The following vehicles will be exempt from the obligation to drive mileage in order to deduct 100% VAT:
intended only for resale, sale or rental, lease or leasing,
for which the taxpayer applies a partial deduction of 50%, i.e. used not only for business purposes,
for which there is no right to deduct VAT from related expenses, i.e. cars that are used for the purposes of activities exempt from VAT.
According to the amendments, the entrepreneur will have a choice from April 1 - to register the vehicle at the office and keep a detailed record of journeys with the company vehicle and then the possibility of deducting 100% of the tax on its purchase, or deduction of only 50% of VAT, but no additional formal burdens.
Before deciding which of the above solutions will be more optimal for the entrepreneur, it is worth considering one more aspect - VAT on operating expenses.
Vehicle mileage records for a company car
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Online advice for businessesEntrepreneurs for whom the use of company passenger cars is at a high level can gain a lot thanks to the possibility of deducting 100% VAT on the purchase of cars and the fuel purchased for them. This profit may compensate them for additional obligations that will be imposed on them.
Additional obligations mean the aforementioned vehicle mileage register, which will have to be kept for motor vehicles weighing less than 3.5 tons, with the exception of those listed in the act as exempt from such records. Such a register will have to include:
motor vehicle registration number,
dates - start and end of keeping records,
car odometer - on the day when the records begin, at the end of each accounting period and at the end of keeping records,
the number of kilometers traveled - at the end of each accounting period and at the end of keeping records.
Additionally, the person driving the vehicle for which the register is drawn up will have to document each journey with a separate entry. Each such entry must have a sequential number, date, destination and route description, number of kilometers and the driver's name and surname.
Moreover, if the person driving the vehicle is not a taxable person, the authenticity of his entry will have to be confirmed by the taxpayer at the end of each tax period.
50-50-50, i.e. VAT on fuel and other expenses
Changes in the scope of VAT deduction will apply not only to the purchase of the car itself, but also to the expenses incurred for its use.Here, too, the dependency will be based on whether the mileage is driven to the vehicle or not.
Thus, in the case of passenger cars and other vehicles that are intended to be used for business and personal purposes, there will be a limit that allows the deduction of 50% VAT on operating expenses. Therefore, from April 1, all car-related purchases - except fuel - will be eligible for a deduction of half of the input VAT.
And from July 1, 2015, it will no longer matter whether it is fuel or other running costs such as parts, fluids or repair. From that date, the deduction of 50% will be a fixed rate for all "car" expenses - including the purchase of gasoline, diesel or gas.
If the taxpayer decides to use the car only for business purposes (reporting the car to the office and driving mileage), the VAT on operating expenses will be deducted in full from April 1, 2014. Importantly, in this case, it will not make any difference, whether it is the purchase of fuel or other expenses related to the day-to-day use of the vehicle.
Selling a car and VAT
The amendment to the VAT Act introduces significant changes not only with regard to the deduction of the levy, because the sale of company cars will also be subject to slightly different taxation rules than until 2013.
First of all, the changes were caused by the fact that the VAT Act no longer covers second-hand goods. According to the Regulation of the Minister of Finance on the implementation of certain provisions of the Act on Value Added Tax of April 4, 2011, the sale of those cars for which it was possible to reduce the tax amount by 50% or 60% of its value (but not more than PLN 5,000 or PLN 6,000), if these cars could be considered used in the light of Art. 43 sec. 2 of the Act. Under that provision, a vehicle that had been used by the company for at least six months could be considered a second-hand product.
Currently, the indicated provision has been repealed, and thus - the indicated definition of second-hand goods has ceased to apply. However, Art. 43 sec. 1 point 2, according to which the supply of goods is exempt from taxation only if the goods were used for VAT-exempt activities, and upon their purchase, there was no right to reduce the output tax. For an entrepreneur who wants to sell a car, it would mean that, unless he used it in his VAT-exempt business (and there is a significant minority of such activities), he should tax such a transaction with VAT at the rate of 23%. The new regulations seem to be very strict in this regard.
They are indeed, but not always in the case of cars. In addition to the amended act, from January 1, 2014, the Regulation of the Minister of Finance on exemptions from tax on goods and services and the conditions for applying these exemptions from December 20, 2013 is also in force. upon purchase, he had the right to deduct input VAT in the amount of 50% or 60%, but not more than by PLN 5,000 or PLN 6,000, respectively. Thus, in fact, the current regulations regarding the sale of cars are even more liberal than they were until the end of 2013. It is no longer necessary to use the car in the company for a period of at least six months to apply the exemption.
Some of the current provisions could be considered inconsistent with the logic - it should be noted that the exemption may be used by those who were entitled to a partial deduction of VAT upon purchase. Therefore, an entrepreneur who has purchased a car on the basis of, for example, a purchase-sale agreement or a VAT-margin invoice that did not entitle to deductions, will have to add 23% tax when selling it even after exceeding six months.
Therefore, work is currently underway to amend the act, according to which, instead of the exemption from taxation of a car for which a partial tax deduction was granted, the so-called new correction system. According to it, an entrepreneur who was entitled to a partial deduction of VAT on the purchase of a car (after April 1, i.e. 50%) and who would like to sell the vehicle before the end of 60 months of use (or 12, in the case of vehicles with a value not exceeding PLN 15,000), will be he could recover some of the tax not deducted upon purchase. The correction will have to be made in proportion to the number of months elapsed.
It is also worth remembering that when selling a car after the indicated 60 months (or 12, respectively, for cars with a value of up to PLN 15,000), the entrepreneur will lose the possibility of using the indicated correction.
As you can see, VAT on cars has undergone revolutionary changes. Moreover, they do not end with the arrival of April 2014, because it is already known that some regulations will not apply until July 2015.