The initial value of the passenger car and the VAT not deducted

At the time of entering a fixed asset into the company's records, it is necessary to establish its initial value. This rule also applies to passenger cars. What to do if the car will be used for mixed purposes and we will not be entitled to a full VAT deduction from the purchase?

Passenger cars in the company and VAT

Since April 2014, the regulations regarding the deduction of VAT on expenses related to the use of cars have changed. A certain restriction applies to entrepreneurs who have or want to enter into their property a passenger car used for both business and private purposes. It is not possible to deduct VAT from the costs incurred for fuel (this will change from July 1, 2015). However, a 50% tax deduction is allowed on the purchase of a vehicle or other operating expenses. According to this principle, we can deduct 50% of the VAT value from the purchase of a passenger vehicle, which will be recorded as a fixed asset.

The situation is different when the taxpayer declares to the tax office that he intends to use the passenger car only for business purposes. To do this:

• fill in the VAT-26 form, taking into account all the required information,

• submit the above-mentioned declaration within 7 days from the date on which the first expenditure related to this car was incurred.

In addition, the taxpayer was obliged to keep records of the vehicle mileage from the first day of using the car only for business purposes. Similarly, this obligation ceases on the day on which the entrepreneur ceases to use the vehicle for these purposes. This is to enable fiscal control authorities to verify whether a given vehicle is or has actually been used solely for official purposes.

Initial value and VAT not deducted

When purchasing a fixed asset, the legislator understands the purchase price as the initial value. This is stated in Art. 22 g of paragraph 1. 1 of the Personal Income Tax Act (u.p.d.o.f) and Art. 16 g of paragraph 1. 1 of the Corporate Income Tax Act (u.p.d.o.p.). On the other hand, the determination of the purchase price is included in Art. 22g section 3 u.p.d.o.f. and art. 16 g of paragraph 1. 3 u.p.d.o.p.

According to them, the purchase price is the sum we transfer to the seller. This amount should:

• increase by the costs related to the purchase of a fixed asset, which we incurred until the date of its commissioning,

• deducting VAT, except when other regulations (the Value Added Tax Act) do not allow us to deduct VAT in whole or in part.

 

Art. 22g sec. 3 u.p.d.o.f. and Art. 16g sec. 3 u.p.d.o.p. "The purchase price is the amount due to the vendor, increased by the costs related to the purchase accrued by the date of transferring the fixed asset or intangible asset for use, in particular the costs of transport, loading and unloading, insurance in the way, assembly, installation and start-up of programs and computer systems, notary fees, fiscal and other fees, interest, commissions, and less tax on goods and services, except where, in accordance with separate provisions, the tax on goods and services does not constitute input tax or the taxpayer is not entitled to a reduction in the amount of tax due for input tax or refund of the tax difference within the meaning of the Value Added Tax Act. In the case of import, the purchase price includes customs duty and excise duty on the import of assets. "

 

It is clear from the above-mentioned articles that the non-deductible VAT increases the initial value of a fixed asset, including a passenger car. Consequently, it also increases the amount of depreciation.