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Judgment of the Regional Administrative Court in Wrocław of 23 November 2015 – fixed allowance for the use of a company car for private purposes includes also fuel

2015-12-10

On 23 November 2015, the Regional Administrative Court in Wrocław issued an unprecedented judgment (ref. no. I SA/Wr 1595/15) by finding that the employer’s free of charge performance which consists in allowing the employee to use purchased fuel for private purposes does not represent a separate performance and is included in the fixed car allowance laid down by legal regulations.

Position taken by the Minister of Finance to date…

Starting as of 1 January 2015, pursuant to amended provisions of the PIT Act, the monetary value of the free of charge performance to which the employee is eligible on account of using a company car for private purposes is determined in the fixed amount of:

  1. PLN 250 per month – for cars with engine capacity up to 1600 cc;
  2. PLN 400 per month – for cars with engine capacity above 1600 cc.

The above provision does not specify exactly whether the fixed value of the employer’s performance for the employee applies only and solely to the use of a company car for private purposes or also to additional benefits (such as e.g. fuel).

In his binding rulings, the Minister of Finance has stated consistently that the fixed values do not include purchased fuel but only charges connected with the car use, such as technical overhaul, civil liability and hull insurance, repairs, replacement of consumable parts (e.g. tyres). Therefore, if the employer decides to cover additionally the employee’s expenses for fuel used for other than company purposes, then the equivalent value of such fuel represents, according to the Minister of Finance, the employee’s taxable revenue under employment.

…versus position of the Regional Administrative Court in Wrocław

The Regional Administrative court in Wrocław came, however, to other conclusions. It cancelled the challenged binding ruling to the extent where it related to fuel, and thus confirmed the interpretation of law more favourable to the taxpayers that the fixed car allowance includes also fuel.

The position taken by the Regional Administrative Court solves also another problem which, assuming the interpretation of law to the contrary, would consist in proper determination of the amount of the free of charge performance received by the employee. Even if the car mileage records, voluntary in this case, were kept, it is impossible to estimate accurately the actual value of financial gain on the part of the employee. Such value must be quantified and not only estimated, which is noted, inter alia, in the judgment of the Constitutional Tribunal of 8 July 2014, ref. no. K 7/13, discussed in our Newsletter from October 2015 in the article devoted to taxation of the employees’ participation in integration events. It is also worth adding that difficulties connected with determination of income from free of charge performance in connection with the employee’s use of a company car for private purposes were also noted in the rationale to the draft law implementing the said Article 12.2a of the PIT Act. It was stressed there that previous regulations had imposed additional obligations on entrepreneurs connected with e.g. the keeping of car mileage records. The fixed allowance was intended to take away any doubts about proper determination of the free of charge performance received by the employee.

The judgment is definitely without precedence, and the interpretation of law made by the Regional Administrative Court in Wrocław is very favourable to the taxpayers. But the decision is not final and unappealable, so we should assume that the dispute will be finally resolved by a court of higher instance. Nevertheless, we may hope that the above judgment will contribute to a change in the line of legal interpretations and judicial decisions prevailing to date.