Tax authorities consistently present a restrictive approach to the deduction of 100% VAT on the acquisition and operation of passenger cars by single-man companies. As indicated by the service legartis.pl, the latest explanation of the manager of National taxation Information (KIS) confirms this trend, creating controversy among experts.
VAT deduction from the car under the taxation glass
Under the applicable rules, entrepreneurs can deduct the full VAT on the car if they usage it exclusively for business purposes. However, Fiskus acknowledges that parking a car under the home clearly indicates the anticipation of private use, which limits the deduction to 50%. This explanation raises peculiar doubts, especially in the case of entrepreneurs operating in their own home.
Joanna Rudzka, taxation advisor quoted by legartis.pl, believes that specified a position discriminates against one-man companies. In its view, the taxation authorities have wrongly assumed the private usage of the car, while any doubts should be resolved through a review procedure alternatively than a negative interpretation.
Latest explanation of KIS
Service legartis.pl cites the explanation of 26 July 2024 (No. 0113-KDIPT1-3.4012.396.2024.2.OS), published for a computer scientist conducting one-man activity at home. In spite of the entrepreneur's declaration of purely professional usage of the car and the introduction of appropriate procedures, the manager of KIS stated that parking the car at the place of residence creates an chance to usage it for private purposes. Consequently, the taxable individual can deduct only 50% of the VAT from the expenditure related to the car.
Paweł Lewandowski, the business consultancy economist, emphasizes in an interview with legartis.pl that the VAT Act does not specify circumstantial mechanisms for preventing private usage of business cars. However, it points out that the rules adopted by the company must be strictly respected in order to be able to prove their implementation in the event of checks.
How to safe your business?
Experts urge single entrepreneurs to implement strict procedures for the usage of business cars to minimise the hazard of a full VAT deduction being called into question by the tax. Here are any key steps:
- Documentation and records: Keeping accurate records of vehicle mileage, including detailed routes, destination and mileage.
- Internal regulations: Introduction of interior regulations and procedures to limit the anticipation of private usage of the car.
- Monitoring: The usage of technologies to monitor the usage of a car, specified as GPS, to paper only the service usage of the vehicle.
- Staff education: Training of employees on the rules for the usage of business cars and the consequences of non-compliance with these rules.
The restrictive approach of the taxation on the deduction of VAT from passenger cars by single-person companies is simply a challenge for many entrepreneurs. It is crucial to implement appropriate procedures and documentation in order to be able to effectively defend itself against negative taxation interpretations and controls.
Continued here:
The IRS begins to control single-member companies. VAT deduction under scrutiny
