Private car in business

Natural persons running a business activity often use their private vehicles in the company. This is mainly due to savings, as buying a car only for business purposes would be associated with an additional expense. On April 1, 2014, new regulations entered into force that change the rules for deducting VAT from operating expenses related to vehicles intended for mixed use.

Passenger car and motor vehicles up to 3.5 tons

An entrepreneur who uses a passenger car for both private and business purposes (e.g. meetings with customers, access to a warehouse to pick up goods) cannot bring it into the company as a fixed asset and thus recognize depreciation charges in costs. Operating expenses related to it, on the other hand, are included in the KPiR up to the limit resulting from the vehicle mileage record.

The most popular costs incurred in connection with the use of a private vehicle in a company are:

• current repairs, parts, oils and fluids,

• fuel,

• parking and motorway fees,

• premiums for OC / AC insurance

• reviews,

• wash.

Private use means that the deduction of VAT is also limited. In the case of passenger cars, from April, the taxpayer may only deduct 50% of the VAT amount on operating expenses. At the same time, he will not be able to make any deductions from fuel - until the end of June 2015.

In the case of private trucks up to 3.5 t with N1 approval, the situation is slightly different, as 50% VAT deduction can be applied to all expenses (therefore there is no limit to the purchase of fuel).

The above restrictions result from the provisions of Art. 86a of the VAT Act, which first sets a limit of 50%, and then exemptions allowing for the application of full deduction of VAT. One of the few exceptions mentioned is a vehicle up to 3.5 tonnes, the design of which precludes its use for non-business purposes or makes it unimportant to use it for non-business purposes. These vehicles include:

• 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:

a) classified on the basis of road traffic regulations into the sub-type:

multi-tasking, van or

b) with the load carrying part open;

2) 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.

Compliance with the above requirements is confirmed on the basis of an additional technical examination carried out by a regional vehicle inspection station, confirmed by a certificate issued by this station, and the vehicle registration certificate containing the appropriate annotation.

Therefore, these vehicles, despite private use, can benefit from a 100% deduction of VAT.

Vehicle mileage record in KPiR

As already mentioned, the use of a private passenger car by an entrepreneur in the company is associated with the obligation to drive mileage. This is because it sets a limit up to which the value of incurred expenses may be recognized in the revenue and expense ledger.

In accordance with the Personal Income Tax Act, the vehicle mileage register should contain at least the following data:

• surname, first name and address of the person using the vehicle,

• Vehicle registration number,

• engine capacity,

• next entry number,

• date and purpose of departure,

• description of the route (from where - where to),

• the number of kilometers actually traveled,

• the rate for 1 km of mileage,

• the amount resulting from the multiplication of the number of kilometers actually traveled and the rate for 1 km of mileage,

• signature of the taxpayer (employer) and his data.

Limit rates in kilometers per mile

In the case of passenger cars, the value of the limit is calculated as the product of the kilometers actually traveled and the rate for 1 kilometer of the vehicle mileage. These rates for today are as follows:

• with an engine capacity of up to 900 cm3 - PLN 0.5214,

• with engine capacity above 900 cm3 - PLN 0.8358.

Keeping a log of the vehicle's mileage is obligatory. According to Art. 23 sec. 5 updof, in the absence of it, the expenses incurred by the taxpayer for the use of cars do not constitute a tax deductible cost.

Truck in the company

In the case of trucks, there is no obligation to keep a log of the vehicle mileage. Operating expenses incurred are fully charged to the company's costs. However, the deduction of VAT, as already indicated, depends on the type of vehicle. A clear situation applies to private heavy goods vehicles weighing over 3.5 tons - the regulations do not impose any restrictions, so both the purchase of fuel and other expenses can be 100% deducted from VAT.