New rules for passenger-car-related cost settlements
The amended Personal Income Tax and Corporate Income Tax Acts have introduced changes concerning the settlements of costs relating to passenger cars owned by taxpayers or used under a lease agreement or an agreement similar in nature.
Since 1 January 2019 deductible costs have included full depreciation write-offs of up to the value of the car not exceeding:
- PLN 225,000 – in the event of an electric-powered car. It is worth noting that the limit does not apply to hybrid cars, which are qualified as other cars;
- PLN 150,000 - in the event of other cars.
Where the initial value of the car exceeds the above mentioned thresholds, the taxpayer can deducts costs only in the part corresponding to the proportion between the above limits and the actual value of the car.
Moreover, the limit of car insurance premiums deductible from tax has been increased and is now PLN 150,000. Given that the previous limit stood at EUR 20,000, the new regulation should be assessed as positive. It should also be emphasised that, although it is not expressly provided in the regulations, the above limit only applies to the optional (AC) insurance as it is the only type of insurance that is calculated in relation to the value of the car.
The limit of expenses under an operating lease, lease, tenancy or other agreements similar in nature is now also PLN 150,000. The limit does not include car insurance premiums, but it does include VAT insofar as the taxpayer is not entitled to deduct the tax. It should be noted that as regards car lease fees, the PLN 150,000 limit only applies to the part of the fees corresponding to the repayment of the value of the car. The changes do not apply to the cars the agreements for which were concluded prior to the end of last year.
Entrepreneurs using cars also for purposes other than business have been required since 1 January 2019 to exclude from tax deductible costs 25% of the car maintenance costs (i.e. inter alia fuel costs, servicing costs, spare parts). Similarly to the above regulations, the total costs comprise the net cost of the goods or services purchased and VAT in the non-deductible part.
Limit on the costs of sale of a passenger car
The tax deductible costs in respect of sale of previously purchased passenger car being a fixed asset comprise include the expenses incurred in its purchase, in the part not exceeding the PLN 225,000 and PLN 150,000 thresholds respectively, after deduction of the total depreciation of the car which had been allocated as the cost of revenue. The above solution, obviously unfavourable to the owners of more expensive cars, only applies to vehicles entered in the register of fixed assets following 31 December 2018.
Magdalena Walczyńska, Tax Consultant, ATA Tax Sp. z o.o.
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