VAT law in leasing
Pursuant to the Tax on Goods and Services Act, the operating lease is treated as provision of services. Therefore:
- VAT is added to each leasing payment upon its maturity;
- the tax rate amounts to 23%, regardless of the VAT rate applied upon the purchase of the object of lease.
For each leasing payment (own contribution, handling fee, lease instalment) a VAT invoice is issued.
VAT on passenger cars
When purchasing a passenger car, companies managing fleets are entitled to deduct the entire amount of VAT. Other companies may deduct only 60% of its value.
In the case of purchase of passenger cars by companies, pursuant to the Tax on Goods and Services Act (Article 86 sec. 3) the input tax amounts to 60% of the amount of the tax stated in the invoice (...), however not more than PLN 6,000.
This provision regulates instances in which the main object of the taxpayer’s activity consists in resale or transfer for payable use of cars (vehicles) under lease agreements. This means that when purchasing a passenger car, CFM companies have the right to deduct the entire amount of VAT. Other companies, which do not fulfil the aforementioned condition, are entitled to deduct VAT according to the principles set forth above upon vehicle purchase as well as its lease.
In the case of lease, 60% of the amount of tax charged on the lease instalment and other payments following from the agreement concluded is subject to settlement. The sum of deductions with regard to one car may not exceed the amount of PLN 6,000.
If upon termination of the lease agreement the User decides to purchase the car previously used, then the User is entitled to a new VAT deduction limit. This results from the fact that the purchase/sales agreement is treated by tax authorities as an agreement separate from the lease agreement. In this case, the User is entitled to deduct VAT following from the invoice documenting the purchase in the amount of 60% of the tax charged, but not more than 6,000.
In the case of passenger cars whose value exceeds EUR 20 thousand separate regulations concerning deductible costs apply.
During the term of the lease agreement depreciation write-offs (made by the Financing Party under operating lease and by the User under financial lease) may be credited towards deductible costs only in the part that does not exceed EUR 20 thousand. Depreciation write-offs on partial value of a car exceeding an equivalent of EUR 20 thousand may not be classified as such costs. In specific cases, other depreciation methods and the so-called individual depreciation rates may be applied. At the same time, a similar principle is applied in the case of insurance premiums. Insurance premium is a deductible cost only in the part not exceeding EUR 20 thousand, while the remaining amount may not be classified as such cost.
Deduction of VAT on trucks
The principles governing deduction of VAT on trucks are the same as in the case of any other form of financing. The entire amount of VAT (100%) may be settled by lease companies as well as the lessee.
|Transaction||Passenger car*||Trucks and vehicles fulfilling the requirements of the Act **|
|Vehicle purchase||60% (not more than PLN 6,000)||100 %|
|Lease fees||60% (not more than PLN 6,000)||100 %|
|Service costs***||100 %||100 %|
|Fuel costs||0 %||100 %|
|Other costs (tolls, washing, etc.)||100 %||100 %|
* Cars and other motor vehicles with the allowable total weight of less than 3.5 tons
** Cars with the allowable total weight of more than 3.5 tons and motor vehicles with the allowable total weight of less than 3.5 tons, but fulfilling the statutory requirements (Article 86 sec. 4 of the Tax on Goods and Services Act), i.e. special-purpose vehicles, busses and vehicles whose construction demonstrates that they are adapted to carrying load
*** In case of rental, if the services described above are provided for in the agreement along with financing, there is a limitation with regard to VAT deduction applicable to the rent.