Car allowance and fuel costs – judgment of the Supreme Administrative Court
On 10 July 2018, the Supreme Administrative Court gave a judgment in the case of lump-sum revenue from using company cars for private purposes. The Court found that the lump-sum amount of revenue includes also fuel costs (judgment of the Supreme Administrative Court ref. no. II FSK 1185/16). Bearing in mind the above judgment, in the case of employees using a company car for private purposes, revenue should be recognised only in the amount as referred to in the Personal Income Tax Act.
In accordance with the regulations effective since 2015, the cash value of gratuitous performance which should be added to the employee’s salary in connection with private use of a car owned by the company, and hence subject to tax, amounts to, respectively:
- PLN 250 per month – for cars with engine capacity up to 1,600 ccm, and
- PLN 400 per month – for cars with engine capacity over 1,600 ccm.
It was an intention of the authors of the draft regulation that the implemented provisions were to resolve any doubts relating to the recognition of additional revenue from the so called gratuitous performance, as well as to simplify the principles of determining the value of the performance. Soon it turned out that according to tax authorities the car allowance included only the employer’s costs connected with making the car available to the employee for private purposes, such as: insurance, tyre change, ongoing repairs, consumables, periodic overhauls, replacement of oil and other liquids, and other parts subject to wear and tear during car driving.
The position of tax authorities on car allowance – unfavourable from taxpayers’ perspective – led to numerous disputes with tax authorities. Decisions in that case were issued by Provincial Administrative Courts in Wrocław, Opole, Gliwice and Warsaw, which nearly unanimously challenged the position presented by tax authorities.
We cannot deny that the position taken by the Supreme Administrative Court is right, because the exclusion of fuel from car allowance would be contrary to the intention of the legislator, who wanted to simplify the principles of determining the value of the performance. In addition, the amount of lump-sum revenue of the employee dependent on the engine capacity unambiguously indicates how to calculate the performance.
The judgment of the Supreme Administrative Court gives taxpayers a possibility to apply for refund of tax overpaid during the year, as well as for correction of prior-year settlements. While employers acting as PIT withholding agents, who in the calculation of tax advances to date included fuel costs apart from lump-sum revenue, should review their previous policy for the calculation of remunerations.
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Michał Drzastwa, Tax Consultant, ATA Tax Sp. z o.o.