Consequences of charging the car to costs at the time of purchase

The purchased car does not always have to be entered into the fixed assets register. It happens when the expected service life of the vehicle does not exceed 1 year. Then the entire purchase value may be recognized as tax deductible costs.

However, it should be remembered that there is a limit to the recognition of expenses related to the use of a passenger car not entered into the fixed assets register as tax deductible costs. Pursuant to Art. 23 sec. 1 point 46 of the Corporate Income Tax Act (hereinafter referred to as the CIT Act), the entrepreneur is obliged to keep records of the vehicle mileage. The tax deductible costs do not include the part exceeding the amount resulting from the multiplication of the number of kilometers of the actual mileage of the vehicle and the rate for 1 km, specified in separate regulations issued by the competent minister.

The car has been used for more than 12 months

In the event that we incorrectly define the time of using the car and it exceeds the period of 12 months, we will be obliged to enter the vehicle into the fixed assets register. Such an obligation is imposed on us by Art. 22e pdof. If taxpayers acquire assets with an initial value exceeding PLN 3,500, and due to their expected use period equal to or shorter than a year, they do not include them in fixed assets, and the actual period of their use exceeds one year - taxpayers are obliged in the first month following month in which this year has passed:

• include these components in fixed assets by taking them into the records at the purchase price
• reduce tax deductible costs by the difference between the purchase price and the amount of depreciation for the period of their current use, calculated for fixed assets using depreciation rates specified in the List of annual depreciation rates
• apply the same depreciation rates throughout the period of making depreciation write-offs
• pay, by the 20th day of that month, to the tax office the amount of interest accrued from the date of recognition of the expenses for the acquisition of assets as tax deductible costs until the date when the period of their use exceeds one year, and the calculated amount of interest should be shown in the tax return (interest on the difference , are calculated according to the rate of late payment interest on tax arrears applicable on the day the asset is included in the fixed assets).

Handing over the car for personal purposes

Entrepreneurs, without entering the purchased passenger car into the register of fixed assets, often aim to transfer it for private purposes. In one such case, the Director of the Tax Chamber in Bydgoszcz, on November 19, 2010, issued an individual ruling no. ITPB1 / 415-853b / 10 / AK.

(...) Pursuant to Art. 23 sec. 1 point 49 of the Personal Income Tax Act, expenses incurred for the purchase of gradually consuming tangible assets of the enterprise, not included in fixed assets in accordance with separate regulations - if it is found that these components are not used for purposes of the conducted business activity, but they serve the personal purposes of the taxpayer, employees or other persons, or are located outside the company's seat without justification.

Recognition of expenses for the acquisition of assets as tax deductible costs is possible, therefore, if the taxpayer proves that the assets (not being fixed assets) were actually used in the activity and contributed to the achievement of income or the preservation or protection of the source of income.

The withdrawal of a passenger car from business activity is not recognized in the tax revenue and expense ledger. Therefore, there is no need to adjust tax deductible costs, since the car was used for business purposes and its purchase was rationally justified.

However, if a given asset does not contribute to the achievement of income or the preservation or protection of the source of income, for example because it was purchased to meet personal needs, it cannot constitute tax deductible costs.

In such circumstances, expenses for the purchase of a car should be excluded from tax deductible costs.

The burden of proving that the purchase was not made for personal purposes, as well as proving the relationship of the expenses incurred with the economic activity and their impact on the amount of revenues earned, rests with the taxpayer. (...)

Thus, in the event that the taxpayer will not be able to demonstrate a sufficient relationship between the purchase of the car and its relationship with the income generated, he will be required to make an adjustment to the costs by the amount previously deducted and, consequently, to pay interest on the understated liability for tax advances. profitable.