The Act of 23 October 2018 amending the Personal Income Tax Act, the Corporate Income Tax Act and certain other Acts was passed by the Sejm on 23 October and approved without amendments by the Senate on 26 October.
The amendment changes the rules for deducting expenditure on leasing and using company passenger cars. President Andrzej Duda signed it on 14 November. It will enter into force on 1 January 2019.
Key changes to leasing and use of company passenger cars
1. For cars used exclusively for business, 100% of operating expenses, such as fuel, servicing, repairs and tolls, will remain tax-deductible. This will also require mileage records as detailed as those currently required for VAT.
2. For passenger cars used for both business and private purposes, 75% of operating expenses will be deductible.
3. The depreciation limit for purchased passenger cars, currently EUR 20,000, will rise to PLN 150,000 for combustion-engine and hybrid vehicles and PLN 225,000 for electric cars.
4. Crucially, the PLN 150,000 limit for combustion-engine and hybrid cars and PLN 225,000 limit for electric cars will also apply to operating leases of passenger cars, which are currently uncapped.
5. Leasing expenditure will not be subject to the 75% deduction limit. This refers to the lease itself, such as instalments and initial payments; fuel, servicing and tyres will be subject to the 75% cap. There is one qualification: if a lease instalment includes operating charges, such as servicing or tyre replacement, that portion will also be subject to the 75% limit.
6. For agreements concluded before 1 January 2019, all related expenditure may continue to be deducted after 31 December 2018 under the old rules, without the PLN 150,000 cap. However, any amendment to those agreements after 31 December 2018 will trigger the new deduction rules. Anyone currently leasing a car worth more than PLN 150,000 therefore has until the end of 2018 to make any contractual changes.
Our comments
These changes will affect all businesses using passenger cars. In most cases, they will be unfavourable and result in a real increase in tax burdens.
• All business owners who also use company passenger cars privately will lose out. From 1 January 2019, deducting only 75% of operating expenditure will effectively increase their tax burden.
• Businesses leasing or hiring a passenger car worth more than PLN 150,000 after 1 January 2019 will also lose out. Only the proportion of the initial payment and each instalment corresponding to PLN 150,000 of the car’s price, or PLN 225,000 for an electric car, will be deductible.
• Businesses selling a not fully depreciated passenger car after 31 December 2018 that cost more than PLN 150,000 will also lose out. The deductible acquisition cost on sale will be capped at PLN 150,000, or PLN 225,000 for electric cars, and reduced by depreciation already charged. Currently, when such a car is sold, its undepreciated portion becomes deductible without being subject to the EUR 20,000 limit.
• Businesses owning or wishing to purchase, including on credit, a passenger car costing more than approximately PLN 86,000 but less than PLN 150,000, or PLN 225,000 for an electric car, will benefit from the increase in the current EUR 20,000 depreciation limit.
• The position of businesses intending to lease or hire a car costing up to PLN 134,529 net, or PLN 165,470 gross, will remain unchanged. At that price, the whole initial payment and all instalments will remain deductible. Remember that 50% of VAT may be deducted: the PLN 150,000 cap therefore includes the car’s net price and non-deductible VAT. PLN 134,529 plus half the VAT gives PLN 150,000 in tax costs. This applies to VAT taxpayers using cars for both business and private purposes. For non-VAT businesses, the threshold is PLN 150,000 gross. For VAT taxpayers using cars exclusively for business and deducting all VAT, it is PLN 150,000 net.
