The trader has the right to deduct the full amount of VAT on expenses related to the use of the cars if the vehicles are used in full business. However, since the introduction of this rule, taxpayers still have problems with its practical application. This is confirmed by the interpretation No. 0114-KDIP1-3.4012.333.2020.2.JG issued a few days ago.
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It concerned the possibility of deducting VAT from related expenses najmem replacement cars, which were then handed over to customers. As explained by Piotr Chojnacki, tax advisor, partner at TA & TPT, the taxpayer who applied for the interpretation decided to protect itself against potential tax risk. – The decision he received is very beneficial for him – confirms the expert
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The contract may exclude the use of the vehicle for private purposes
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The Director of the National Tax Information indicated that the conclusion of contracts and the introduction of regulations for the provision of replacement vehicles excluding private use provide the basis for deducting the full amount of VAT. The case concerned the expenses for hiring a replacement vehicle from a group entity which is then rented out to a customer. Provisions of contracts and provisions of the regulations must be respected.
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– It is worth noting that in this situation the taxpayer will not be obliged to keep records of the vehicle mileage – adds Piotr Chojnacki.
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Full VAT deduction possible
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Agnieszka Górecka, chief accountant at PGA Accounting, points out that the entries in the lease agreementwhich will directly indicate that: the purpose of renting a replacement vehicle is to make it available for a fee to a specific customer as a replacement car. The expert also adds that the condition of keeping records of the vehicle mileage does not apply to motor vehicles intended only for use against payment under a rental agreement. This rule results from Art. 86a paragraph. 5 point 1 lit. c of the VAT Act. – This provision applies if the use of these vehicles for remuneration is the subject of the taxpayer’s activity and excludes the use of replacement cars for private purposes, even temporarily – notes Agnieszka Górecka.
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Private use of the vehicle must be ruled out
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The problem, however, is that special provisions allow for the full right to deduct VAT in relation to all expenses related to motor vehicles used exclusively for the taxpayer’s business activity, they do not specify what mechanisms the taxpayer should apply to exclude the use of such vehicles for private purposes – not related to business activities.
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As explained by Piotr Świstak, an attorney in the practice of VAT tax disputes in GWW, the latest jurisprudence of administrative courts (such as the judgment of the Provincial Administrative Court in Rzeszów of June 2, 2020, file reference number I SA / Rz 266/20, or the judgment of the Provincial Administrative Court in Opole of December 13 2019, file reference number I SA / Op 416/19), indicates that the exclusion of the right to full VAT deduction cannot be automatically determined. The risk of the potential use of a company vehicle for purposes other than those related to the taxpayer’s business activity always exists when the so-called Human factor. This circumstance cannot be completely eliminated, therefore the taxpayer should create such mechanisms and rules for the use of vehicles that will give the maximum guarantee of their use only in the taxpayer’s business.
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– In the facts presented in the interpretation, the taxpayer not only created such mechanisms (contracts, regulations), but through the very structure of the business process of renting replacement cars, in fact, in fact eliminated the physical possibility of using the vehicle for private purposes by service employees. This example shows how important the tax planning process is at the stage of implementing business mechanisms – it is not only the proper definition of contract provisions, the scope of benefits and the manner of their implementation, employee training, but also taking care of appropriate records in the documentation – such as indicating in the replacement car insurance policy that the vehicle will be insured for commercial rental purposes and as a replacement vehicle – summarizes Piotr Świstak.
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The taxpayer, introducing appropriate rules as part of his business (also included in the relevant documentation), ruled out the possibility of using the vehicle for private purposes. Therefore, regardless of the way the vehicle is used by customers, the lessee has secured his right to a full VAT deduction.
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2h ago
Sad RomekAnd do ministers in this country pay tax on the use of company cars for private commuting, etc.?
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1h ago
WaldasFrom the beginning of 2020, according to agreements with the union, there should be a 100% VAT deduction for passenger cars, it is strange that no one noticed
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