On November 14, 2018, Andrzej Duda signed an amendment to the income tax law on PIT and CIT. This means that as of 1 January 2019, new tax regulations regarding the leasing of passenger cars will come into force. What changes will the new law introduce?
The costs of using cars
The Amending Act also introduces provisions that change the way in which expenses related to using a car for business purposes are recognized as tax-deductible. Such expenditures are, for example, fuel, oils and other “fluids”, service, inspections, repairs, spare parts, tires.
From January 1, 2019, the taxpayer will be eligible to be included in the BUY:
– 100% of expenses – a car used only in business;
– 75% of expenses – mixed use;
– 20% of expenses – private car used in the activity, not introduced into fixed assets (only in PIT).
The indicated limit also applies to VAT. Part of the un-calculated VAT, which can be counted as BUY, will also be covered by the above-mentioned limits.
The amendment signed by Andrzej Duda changes the depreciation limit for passenger cars used in the business. It was increased to 150,000 PLN for cars and up to 225 thousand. PLN for electric cars. The new law makes it impossible to include in the tax costs of this part the value of amortization write-offs in which their value exceeds PLN 150,000. PLN or 225 thousand PLN (currently it is EUR 20,000).
Unfortunately, there are no transitional provisions that would indicate (or not) the possibility of applying a new limit level for already depreciated cars. Specialists predict that the first official explanation of this issue will appear at the beginning of next year.
The legislator also introduced regulations referring directly to the settlement of costs related to the use of passenger cars resulting from a leasing contract or another agreement of a similar nature. This is a completely new solution on the Polish market. According to the legislator, it is intended to prevent preferential taxation of a lease in relation to the purchase of a passenger car. The new regulations limit the taxpayer’s right to include in the tax costs all fees resulting from a lease, tenancy or lease (or similar) agreement.
This means that for cars with a value above 150,000. The taxpayer will be able to include only the part of each lease payment in the proportion in which the car’s value complies with the indicated limit. This limit will not apply to the interest portion of the leasing installment. Attention! Within the above-mentioned limit, there is also the value not counted when purchasing VAT tax.
The new regulations will be of importance mainly for cars, the value of which exceeds 150,000. zł. In the case of cars below this value, it will still be possible to count the total tax costs.
Costs related to expenses related to the use of a passenger car purchased under a lease will also be covered by a 75% limit – analogically to the above. This is another new regulation that changes the current method of settling expenses for leased passenger cars.
Paid car sale
Limit of 150,000 PLN will also apply in the case of sale of a car with fixed assets for a fee. The cost of obtaining revenues will be expenses for the purchase of a passenger car, in the part not exceeding the indicated limit, after they have been reduced by the amount of depreciation write-offs made. Simplifying, the cost of obtaining revenues will be the difference between the depreciation limit (PLN 150,000) and the value of depreciation charges recognized by the taxpayer as tax deductible costs. Attention! This change applies to cars entered into the register after January 1, 2019.
When will the new law come in?
The new regulations will apply to agreements concluded after 31 December 2018 for lease, tenancy or lease agreements. Therefore, if a lease agreement is concluded before January 1, 2019, the taxpayer will apply the currently binding rules to it (the entire leasing installment in the BUY), without any time limit – until the end of the leasing period. On the other hand, in the situation where after 1 January 2019 these agreements will be renewed or changed, new regulations are already in force.