Operating leasing: VAT, CIT, PIT

August 29, 2023

There are two main types of car leasing: financial leasing and operational leasing. What exactly is an operating leasing? Should VAT be settled on the full value of the leased asset at the beginning of the contract? How to settle leasing installments for income tax purposes?

What is the operational leasing?

Operational leasing is a contract on the base of which we have the right to use the leased item (e.g. Car) in exchange for paying monthly leasing instalments. In the case of this type of leasing, in contrast to financial leasing, the user does not have the right to depreciation write-offs, in the costs they will have the right to settle recurring leasing instalments.

In agreement with tax laws (PIT i CIT), for the given contract to be recognised as operational leasing the following criteria must be met:

1. The duration of the contract is of a minimum 40% of the so called normative depreciation period, which for motor vehicles is 24 months.
2. The sum of payments established with the framework of the leasing contract (without VAT) equal at least the baseline value of the leased object.

Operational leasing – VAT purposes

VAT

For the aim of VAT operational leasing is treated as a service, that is why there is no obligation to settle VAT of the full value of the leased object at the beginning of the contract, this will happen as part of periodic leasing instalments.

PIT, CIT

From the perspective of the user the key issue is the way of settling lease instalments for the purpose of income tax – these regulations are identical, regardless of, if we are PIT or CIT taxpayers. For the purpose of these settlements, the value of the motor vehicle is important. If this value does not exceed:

1. PLN 150 000 – in the instance of cars which are not electric or hydrogen based
2. PLN 225 000 – in the instance of electric or hydrogen based cars

– in these instances you will be able to count the full value of instalments in the costs

Operational leasing – example

However if the above indicated values are exceeded, then lease payments can be credited to tax-deductible costs corresponding to the ratio of 150 000/225 000 złoty PLN (depending on the type of motor vehicle) to the actual value of the motor vehicle.

Example: if the object of leasing is a car (Diesel, valued PLN 200 000) then 75% of leasing payments can be counted as tax-deductible – This is due to the calculation of PLN 150 000 (i.e. the statutory limit) to PLN 200 000 (the value of the car).

Important! The above limits account only for the capital part of the monthly leasing instalments. The interest can be settled in full in the costs, this is because it does not result from the value of the vehicle and it is included in the payments resulting from the leasing agreement.

It is also important to refer to the limits stated above, the method of settling VAT by the user (example for PLN 150 000):

1. VAT tax payers, who use a car in a so called „mixed” manner (therefore on business interests and also private) – have the right to a 50% VAT tax deduction. The second 50% of VAT is included in the calculation of the limit – that is why also in the calculation of proportions, to settle tax-deductible costs, the gross value shall be taken up to PLN 165 470 which gives a net value of about PLN 134 528.
2. VAT tax payers, who use a car exclusively for the interest of the business – deduct 100% of VAT tax and consequently in the inclusion of proportions they can adopt a  gross limit of PLN 184 500, which is about PLN 150 000 net value.
3. The remaining tax payers (so called no-vaters) – the limit will be exceeded at a gross value PLN 150 000, which is about PLN 121 951 net value.