On 1 January 2019 there were amendments resulting from the amendment of the income tax act, which applied to leasing of passenger cars. They will most strongly affect entrepreneurs who use company cars not only for business purposes but also for private purposes.
Is leasing still profitable?
Someone asking such a question prior to the recent amendments would most certainly end up with “yes” as the answer to it. By the end of 2018, both the payment of leasing installments and costs incurred for other expenses related to the operation of the car were included in of the tax deductible costs in 100%. Currently, it is a bit worse, and especially entrepreneurs who decide to buy more expensive company cars will be affected by it. You certainly do not have to be afraid if you intent to use the car for corporate purposes only. In this case, the regulations remained unchanged. Otherwise, the situation will change significantly.
Leasing for companies – VAT
An entrepreneur deciding to buy a car for less than PLN 150,000 (225,000 in case of an electric vehicle) will still gain. Comparing this amount to that of 2018 amounting to PLN 85,000, you notice a significant difference in plus. Installments and initial fees will be included in the total tax deductible expenses. The same amounts (150,000 and 225,000) relate to operating leasing of passenger cars.
Buyers of more expensive cars, worth over PLN 150,000 will encounter a relatively worse condition. In this case, you will be able to deduct only part of the expenses incurred, as limited by the aforesaid price limit. In turn, if you use a leasing car for corporate and private purposes, the cost of incurring income will amount to only 75% of expenses, and not 100%, as it was the case until recently. Other operating costs of the vehicle are not covered by the new limit, unless such a record appears in the contract. Of course, it must be remembered that this restriction will also apply to cars bought before 1 January 2019.
How to deduct leasing from VAT? In the case of leasing, VAT is deducted in the same way as when buying cars on an invoice. If we, as the entrepreneur, decide to use the car for both corporate and private purposes. We may then deduct 50% of leasing installments, fees included in the contract, fuel and operating costs. The right of complete tax offset is only granted to those who register the car with the Tax Authority, define their internal regulations and keep record of all car travels.
Anyone who does not know exactly how the leasing works, must gather relevant knowledge, ask friends to make the right decision about acquiring a car for the company. In general, leasing is more profitable than long-term rental. You do not have to worry about the condition of the car on the day you bring it to the rental company or strictly follow the rules of car use reserved in the contract. There is also no problem with mileage limits. What’s more, the vehicle can be purchased for a small amount after some time, which is very profitable. Although leasing installments are larger than rental ones, in case of annual and long-term use of the car, the positive result will be on the leasing side.
How to lease a car? The procedure is really simple. To conclude the contract, relevant documents will be required, i.e.: ID cards of two persons of the company purchasing the vehicle, leasing application, NIP, REGON, KRS and EDG documents. One must also certify that he or she is not in arrears with official deductibles and duties by presenting the relevant PIT and CIT returns. Sometimes the leasing companies also demand company registration documents to make sure that they are in good condition and have no debt.