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Deduction of VAT related to the operation of rental or leased cars

Deduction of VAT related to the operation of rental or leased cars (judgment of the Supreme Administrative Court of October 7, 2020, reference number I FSK 2003/17)
The judgment was issued in the case of a taxpayer – a natural person running a business, including in the field of rental and lease of means of transport. The taxpayer provided the services in question under a management contract. The motor vehicles were used only for the purposes of the enterprise, ie for paid rental. The taxpayer was not required to keep a mileage register, but it did so on an optional basis. He applied for an individual ruling in order to confirm the right to a full deduction of VAT related to the use of cars. The tax authority questioned the right to a full tax deduction, arguing that the taxpayer did not rule out the possibility of using the cars for private purposes, because they are parked in his parking lot and he himself has access to the keys of the returned cars.

However, both the Provincial Administrative Court in Wrocław and the Supreme Administrative Court ruled that the condition of using the cars exclusively for the taxpayer’s business activity was met. In addition, despite the lack of the obligation to keep records, the taxpayer had them, which additionally confirms the right to full deduction of VAT related to the use of cars. This is not changed by the fact that the cars were parked in the taxpayer’s parking lot, which theoretically could be used for private purposes.

Consequences in practice

The above judgment confirms that taxpayers engaged in car rental or lease are entitled to a full deduction of VAT resulting from their use, if these vehicles are used in the course of their business activities. It is worth paying attention to the court’s finding that the mere fact related to the place of parking of the rental or leased cars, which creates a potential possibility of using them for private purposes, does not deprive the taxpayer of the right to full VAT deduction.

Source Deloitte

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