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Using a company car for private purposes and the cost of fuel | Piotr Kamiński

Using a company car for private purposes

Beginning from 1st January 2015 the income tax treatment system related to the use of company cars for private purposes by employees has changed. The existing rules were replaced by a lump sum, which has defined the value of benefits received by an employee for the use of a company car for private purposes.


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In line with article 12 paragraph 2a of the Act of 26th July 1991 on personal income tax (consolidated text in the Journal of Laws of the Republic of Poland 2012, position 361, with amendments, hereinafter: the PIT Act), the value of such benefits is fixed at PLN 250 per month for cars with engine capacity of up to 1600 cm3 or PLN 400 per month for cars with engine capacity of over 1600 cm3. These amounts are properly credited to the employee's income under his employment relationship.

This is a very convenient, logical and simple solution. It ensures equitable taxation of employees using company cars for private purposes and prevents the possibility of non-taxation of benefits. However, it also raises a lot of concerns, particularly of the tax authorities. Thus, the question arose whether the lump sum amount of the income on the basis of the benefit includes only the possibility of using the car or also the operating costs incurred by the employee.

The main point of contention between the taxpayers and the tax authorities are the operating costs of a company car used for private purposes. Fuel constitutes most of these costs. The question thus arose whether the cost of fuel paid by the employer and used by the employee through the operation of a company car for private purposes should generate additional income on part of the employee.

The tax authorities often take a position unfavorable for taxpayers, claiming that the lump sum covers only the costs arising from the employer providing a company car for private purposes.

As an example, it is worthwhile to cite the individual interpretation of 15th May 2015, no. IPPB2 / 4511-296 / 15-2 / AS in which the Director of the Tax Chamber in Warsaw recognized that the value of the substantive gratuitous benefit specified as a lump sum covers only the employer’s costs arising from the provision of a company car for private purposes to the employee. In a situation where the employer decides to also cover the expenses of the employee, e.g. fuel used for purposes other than business, then the value of this fuel will constitute taxable income under the employee's employment relationship.

The breakthrough on this issue was, however, marked by the decision of the Voivodship Administrative Court in Wrocław on 23rd November 2015, ref. I SA / Wr 1595/15, which stated that the cost of fuel purchased by the employer and used for private purposes should not be added to the income of an employee using a company car. In its reasoning, the court rightly observed that:

“(...) the benefit received is the use of a company car for private purposes. Using is equal to utilizing, operating. Contrary to the position of the authority, the benefit here is not the sole provision of the car. It is ensuring the possibility of its proper use. This includes bearing all the necessary expenses that allow such use. There is no justification to consider one type of the expenses – fuel expenses – to be considered as constituting a separate benefit. As the applicant rightly pointed out, it is not possible to use a car without purchasing fuel.”

The judgment also assumed that such understanding of the provision shows that the legislator has established different amounts of the lump sum, which were directly related to the engine capacity of the car. Thus, the main element evaluating the level of the lump sum is the parameter conditioning the usage of fuel. It should be also noted that, on the other hand, engine capacity has negligible impact on other operating costs.

Furthermore, the Voivodship Administrative Court confirmed the position of the legislature that the task of introducing a lump sum for the use of company cars for private purposes was to significantly simplify the regulations.

“Including in the lump sum only the provision of the car or possibly the fixed costs associated with its operation with the need for a separate complex determination of the costs of fuel will not accomplish the identified objective. On the contrary, it would further complicate the collection of the necessary records,” recognizes the court in its judgment.

In May 2016 two further rulings by the Administrative Court in Warsaw were issued (judgment of 5th May 2016, III SA / Wa 1925/15) and by the Administrative Court in Opole (judgment of 6th May 2016, I SA / Op 68 / 16), which confirm such a position.

In practice, companies using the services of tax advisors determined the value of this benefit solely on the basis of the engine capacity of the car, not taking into account and adding the cost of operating the car, including fuel. These judgments confirm the accuracy of the interpretation of the rules and give confidence to employers, employees and advisors as to the method of determining the value of the service which is the use of a company car for private purposes.

Piotr Kamiński, Specialist of the PIT Team

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