Changes with regard to taxes on leasing, depreciation and operating costs of passenger cars in 2019 in Poland

At the end of October 2018, the Ministry of Finance introduced changes that have a real impact on entrepreneurs that lease their cars, which is a popular form of car rental in Poland. It is worth closely following the revisions to the regulations so as not to be caught out by the changes and the potential benefits they may bring. 

The most important information "in a nutshell":

• the changes came into force on January 1, 2019,
• the depreciation limit, which in the current year is EUR 20,000 for internal combustion and hybrid cars, purchased on credit or for cash, will increase to PLN 150,000,
• the depreciation limit for electric cars will amount to PLN 225,000,
• in the case of passenger cars used exclusively for business purposes, 100% of operating expenses such as fees for motorways, fuel or servicing, etc., will be deductible,
• in the case of cars used for both business and private purposes, only 75% of the value of operating expenditures will be deductible. The date of the conclusion of the contract will not matter in this case,
• cars leased until the end of 2018 will be subject to the existing regulations.

Depreciation limit

The depreciation limit was changed in 2019. Since then, it also includes leasing expenses and the limit, in direct proportion to its value. For example, if a leasing car has a value of PLN 300,000 and the leasing instalment is PLN 8,000, then only PLN 150,000 / 300,000 x 8,000 = PLN 4,000 can be included in the tax costs.

Who will be most effected by the changes ?

Certainly, it will not be ordinary people with vehicles that are valued at less than PLN 20,000. In Poland, that is what the majority of car leases are, and for these users the situation will change only slightly. However, with each passing year, the percentage of luxury cars on Polish roads also increases. Their owners will not be happy with the upcoming changes, though, as the new regulations state as follows:

The costs under a leasing contract or similar contract, as described in art. 23a item 1, with the exception of fees for car insurance premiums, in the amount exceeding their share set in the same proportion in which the amount of PLN 150,000 remains to the value of the passenger car being the subject of the agreement, shall not be considered as tax-deductible costs for a passenger car..."
This means that before one starts to recognize the lease instalments in the costs, it will be necessary to calculate the proportion of taxable and non-deductible expenses. The changes will also be felt by entrepreneurs who use cars for both business and private purposes, as mentioned above.

What will be the best course of action?

Many experts are concerned that the new rules will have a negative impact on the leasing market. They advise to conclude contracts by the end of 2018, because these cars will be covered by the existing regulations. Most importantly - regardless of the date of collection of the car. This means that the car can be picked up in 2019 and will not be subject to the new regulations. This will not change even if the VIN number of the car is lacking. It will be possible to add it without changing the contract for a less favourable one, unless an annex is required.