Purchase of a car from leasing and its subsequent sale

Entrepreneurs more and more willingly choose leasing as a method of financing the purchase of a car. It is an attractive form of financing the purchase due to the fact that it allows you to buy a vehicle on preferential terms, often lower than the market price. Read the article and check how the purchase of a car from leasing and its subsequent sale should be accounted for.

Purchase of a car from a lease to a company

The purchase of a car from leasing to a company gives the entrepreneur the opportunity to enter the property in the register of fixed assets. Then the expense will be booked in costs through depreciation write-offs. There are often situations in which the purchase price differs significantly from the market price and does not exceed PLN 10,000. Then the entrepreneur has the option of entering the vehicle into the fixed assets register and making a one-off depreciation due to the low value of the car. In a situation where the car was purchased for mixed use (it will be used in business and potentially privately) then the entrepreneur will be entitled to a partial VAT deduction.

At the time of sale of a company car, income from business activity must be reported, regardless of whether the sale will take place after one month and before or after six months. Importantly, such a sale is treated as a supply of goods for consideration and is therefore taxed at a rate of 23%.

When selling a car, the entrepreneur may, however, be entitled to deduct the remaining VAT amount from the buyout invoice by means of input tax adjustment made pursuant to the provisions of Art. 90b of the VAT Act. In the case of motor vehicles with an initial value not exceeding PLN 15,000, the correction period is only 12 months. Thus, when selling a car one year after the end of the month when the car is leased out, the taxpayer will not be entitled to such correction.

It should be noted that if the entrepreneur did not have the right to deduct VAT from the purchase of the vehicle, e.g. the purchase was made on the invoice, then the transfer of the asset for private purposes does not result in VAT consequences. Thus, the sale of such a recalled vehicle will not be subject to VAT. However, according to Art. 10 sec. 2 point 3 of the PIT Act, the sale of a previously withdrawn fixed asset for consideration will not lead to income from economic activity only when the sale takes place after 6 years from the first day of the month following the month in which the vehicle was withdrawn from the company's assets.

Leasing a car for a private person

An entrepreneur may also purchase a car that is under corporate leasing, i.e. outside of business activity. Such a decision causes that the car is not included in the assets of the taxpayer's enterprise. Consequently, the sale of such a vehicle is not subject to VAT.

A natural person, purchasing a car from another private person, is obliged to settle the tax on civil law transactions (PCC) in connection with the conclusion of the purchase and sale contract. The buyer has 14 days to submit a correctly completed PCC-3 form to his tax office and to pay the tax to the account of this office. In the case of concluding a contract for the purchase and sale of a movable item (including a vehicle), the tax rate is 2% of the market value of the subject of the transaction. In the case of purchase on an invoice from a leasing company, there will be no need to settle PCC.

In this situation, it should be emphasized that in accordance with the provisions, after meeting certain conditions, the sale of a car purchased from leasing privately will not be subject to income tax. Pursuant to Art. 10 sec. 1 point 8 lit.d of the PIT Act, the sources of income are the sale of other things for consideration, if the sale for consideration does not take place in the performance of economic activity and was made within six months from the end of the month in which the acquisition took place. Therefore, it is enough to wait 6 months with the sale.

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The argument confirming the thesis is the position of the Minister of Finance in the individual interpretation of February 25, 2016, No. DD9.8220.2.56.2016.KZU. The applicant running a business asked the authority with the question: will the sale of a car bought for private purposes (not entered into the register of fixed assets) after at least 6 months from its purchase, will be subject to income tax?

In response, the authority took the position: (...) since the car bought after the end of the leasing contract will not be used by the Applicant in business activities and will not be included in the company's assets listed in art. 14 sec. 2 point 1 of the Act, the income obtained from the sale of this car will not constitute income from business activity. Revenue from the sale of this car should be qualified as the source of revenue referred to in Art. 10 sec. 1 point 8 lit. d) the act, i.e. for the sale of things against payment. In a situation where the sale of the car took place after six months from the end of the month in which it was purchased, the Applicant's tax obligation will not arise.

However, it should be emphasized that in the past this issue was the subject of a dispute among tax authorities, which point to the fact that only the lessee's party, i.e. the entrepreneur, is entitled to preferential conditions for the purchase of a car from leasing, i.e. the entrepreneur, and not a natural person. Thus, each sale of a vehicle that was previously used in business activities under an operating lease agreement, and after it is purchased privately used by an entrepreneur, results in the generation of income in the business. Therefore, the revenue should be shown if the car is sold within 6 years from the withdrawal from the property or liquidation of the business activity. This position was confirmed by the Director of the Tax Chamber in Bydgoszcz in the individual ruling of November 23, 2011 (ITPB1 / 415-926 / 11 / AK) and the Director of the Tax Chamber in Poznań in the ruling of November 6, 2012 (no. ILPB1 / 415-803 / 12-4 / AG).

To sum up, the purchase of a car from a lease to a private person and its subsequent sale cannot be clearly assessed from the point of view of income tax. This issue has been the subject of many disputes in the past. Therefore, the entrepreneur has the possibility to apply for an individual interpretation in his specific case to confirm his position.