Amortized car - what to do with it?

How to settle a fully depreciated car? - taxpayers often ask themselves this question. There are many solutions, incl. sale, private use or even donation. What tax consequences are they associated with and what formalities should taxpayers follow?

Sale of a depreciated car - VAT and PIT

When selling a fixed asset directly from the company's assets that was used for taxable activities, a VAT invoice must be issued. As a rule, such an obligation occurs even if the taxpayer did not have the right to deduct VAT when purchasing it.

In the case of passenger cars or other vehicles with a permissible total weight not exceeding 3.5 tons, if the car is sold within 60 months of its purchase (or 12 months, if the value of the car does not exceed PLN 15,000), then the taxpayer may adjust the input VAT .

Example 1.

In April 2016, the taxpayer purchased a passenger car worth PLN 30,000 and took advantage of the possibility of deducting 50% of the input VAT. We assume that in November the taxpayer decides to sell the purchased vehicle. Such a procedure will allow him to correct the proportional part of the VAT on the purchased car.

• tax amount as indicated in the invoice: PLN 30,000

• tax amount deducted at the time of purchase: PLN 3,450

• the amount of tax not deducted: PLN 3,450

• number of months of the correction period: 60

• number of months remaining in the correction period: 52 (60 - 8)

PLN 3 450 x 52/60 = PLN 2 990.

The amount of the correction of the input tax on the sold vehicle is PLN 2,990.

On the basis of income tax, when selling a fully depreciated car, operating income is generated, which should be booked in col. 8 KPiR - Other income.

Amortized car - withdrawal for private purposes

As an alternative to the sale, the depreciated company car may be transferred (recalled) for private purposes to the entrepreneur.

When withdrawing a fixed asset for private purposes, if the taxpayer had the right to deduct VAT when purchasing it or when purchasing its component parts, then when transferring ŚT for private purposes, VAT should be charged as in the case of sale. This rule applies to any gratuitous transfer, including donation - if the taxpayer would choose it instead of private use.

Attention! A constituent part of a given component is everything that cannot be detached from the whole without damaging it or without substantially changing the disconnected object.

As in the case of the sale of a fixed asset - if the withdrawal is subject to taxation and concerns a passenger car or other vehicle with a maximum permissible weight not exceeding 3.5 tons and will take place within 60 months (or 12 months, if the value of the car does not exceed PLN 15,000), it is the taxpayers who can correct the input VAT.

In terms of income tax, the mere fact of withdrawing a depreciated fixed asset for private purposes does not have any consequences in terms of income tax. However, if the taxpayer decides to sell it within 6 years from the withdrawal (counting from the month following the month of its withdrawal), the received cash is the income from activity subject to entry in col. 8 KPiR Other income. The exception is when a fixed asset is sold after 6 years, counting from the first day of the month after the month in which it was withdrawn from the records. Then this income will not be taxed with PIT.

The system of VAT corrections and a depreciated car

If the taxpayer who has the full right to deduct VAT in connection with the use of the purchased vehicle only in business activities within 60 months from the date of its purchase changes its purpose, then he will be obliged to reduce the tax deducted.

In a situation where the taxpayer has the right to a 50% deduction of input tax, and within 60 months from the purchase of the vehicle, he sells it (taxed) or changes its purpose - then he will be able to increase the tax to be deducted in proportion to the remaining correction period.

Cars with an initial value of up to PLN 15,000 are subject to a 12-month correction.

Attention! The value of the correction of input VAT depends on the moment when the taxpayer decides to change the purpose of the vehicle.