Leasing as a financial instrument in business activities in Poland generally complies with the same generally accepted conditions as in other EU countries. Some general and specific commercial and tax leasing conditions for passenger cars are provided below.

Commercial and tax conditions for car leasing in Poland:

1. Operational and financial leasing is applied.

• In operating leasing, the subject of leasing (car) is an asset and is on the lessor's balance sheet. Tax-free expenses of the lessee include monthly lease payments and initial payment. After the expiration of the operating lease agreement, the lessee has the right to purchase the leased asset. The amount of the lessor's commission specified in the contract, excluding VAT, must correspond at least to the initial cost of fixed assets. Taxpayers can purchase a car under a leasing agreement for corporate and/or personal purposes.
• Under financial leasing, the leased asset (car) is an asset and is on the lessee's balance sheet. The lessee makes amortisation and pays lease payments. After the end of the financial lease agreement, the lessee is guaranteed to receive the leased asset. In this regard, there are two operations – for the purchase of the leased asset (delivery of goods) and for lease payments (service).

2. Amortisation of the subject of leasing (car) in case of financial leasing.

• If the value* of the leased asset is up to PLN 10,000, it can be taken into account as a fixed asset with subsequent amortisation or included as a lump sum in the company's expenses.
• If the value* of the leased asset exceeds PLN 10,000, the taxpayer is obliged to enter it into the register of fixed assets with subsequent amortisation.

* Net for active VAT taxpayers and gross for VAT exempt taxpayers.

3. Limits on expenses on the subject of leasing (car) under operational leasing for corporate and personal income taxes.

Cost limits apply:

• PLN 225,000 – in the case of a passenger car that is an electric vehicle and in the case of a passenger car powered by hydrogen,
• PLN 150,000 – for other cars.

The limit applies only to the part of the payment that relates to the repayment of the original cost of the car, including VAT. The percentage of the lease payment can be included in the tax-free expenses in full.

If the car is used not only for corporate but also for personal purposes, the taxpayer can deduct 75% of the costs incurred in connection with its use as deductible expenses.

4. Tax on the income of entrepreneurs – individuals upon purchase of the subject of leasing, which is movable property, after the end of the leasing agreement.

When repurchasing such property into private ownership before the expiration of 5 years from the end of the tax year in which the repurchase of the leased asset took place, an entrepreneur must take into account income for tax purposes, that is, pay personal income tax and also a contribution to medical insurance. For example, if the purchase under a lease agreement took place in November 2022, then the car can be purchased without paying income tax after December 31, 2027.

An entrepreneur pays income tax at a rate that depends on the form of business taxation.

An exception is the purchase of a leased asset, for example, a car, before January 1, 2022. Despite the fact that its sale will take place after December 31, 2021, the income from such a sale will be settled according to the previous rules, that is, with no payment of tax when selling in within 6 months.

5. Contributions for health insurance for entrepreneurs upon purchase of the object of leasing after the end of the leasing agreement.

Also, health insurance contributions must be paid on income from the sale of a leased asset to private ownership before the expiration of 5 years, counting from the end of the tax year in which the purchase was made. The contribution to health insurance also depends on the tax form of the entrepreneur and is 9% or 4.9% of income.

6. VAT on the purchase value after the end of the lease agreement.

• If the vehicle is purchased not by the lessee, but by a third party, the purchase value will be equal to the market value of the vehicle, including VAT.
• When the leased asset is purchased by the lessee, the purchase amount will be the amount specified in the lease agreement.

The purchase of the leased asset by the lessee for corporate purposes allows deducting VAT in the amount of 100% of the purchase value of the car. When using the car for mixed (corporate and personal) purposes, 50% VAT can be deducted from the purchase value of the car (the rest of the tax can be added to the cost for amortisation).

7. Correction of the VAT deduction upon the subsequent sale of a car of a company (entrepreneur), which was purchased under a leasing agreement.

The car of the company (entrepreneur) must be sold at the full rate of 23% VAT, even if only part of the VAT was deducted when buying it. The “zw” rate can only be applied by a taxpayer who is not a VAT payer and did not withhold VAT when purchasing a vehicle.

There is some possibility to “take into account” VAT not deducted upon purchase with VAT correction. That is, during the subsequent sale to the company (entrepreneur), that part of the VAT that was not deducted by them when buying a car is compensated. The correction period depends on the value of the car:

• up to PLN 15,000 – 12 months,
• over PLN 15,000. – 60 months.

The adjustment is made for the billing period in which the sale occurred in an amount proportional to the remaining correction period. For example, if a car was purchased by an entrepreneur who is a VAT payer on November 1, 2022, then when it is sold on November 30, 2022, it is possible to make a VAT correction for 12 months. In the case of using a car purchased under a leasing agreement for mixed purposes (corporate and personal), the entrepreneur deducts 50% VAT (Table 1).

Table 1 – Calculation of VAT correction when selling a car, PLN

The amount of the tax correction that increases the input VAT is PLN 2,760. For November 2022 (the month of sale), the taxpayer will be able to increase the deductible input tax amount by PLN 2,760.

8. The method of further use of the passenger car affects the amount of deductible VAT. The right to deduct VAT is in the amount of:

• 50% if the car will be used for both corporate and personal purposes;
• 100% if the car will be used only for corporate purposes. The taxpayer has the right to deduct VAT in the amount of 100%, subject to the simultaneous fulfillment of 4 conditions:

– the car is used only for corporate purposes,

– mileage is recorded for VAT purposes,

– the vehicle was listed on the VAT tax form (VAT-26),

– the regulations for the use of a car in a company (for an entrepreneur) apply.

9. VAT form (VAT-26) after purchase under a leasing agreement or return to the lessor of a car.

To update data on the use of a car that was purchased under a leasing agreement for corporate or personal use (if they change), as well as in the case of returning the leased asset (car) to the lessor, the taxpayer must report these facts to the tax office in the form of VAT (VAT-26). The sale of the subject of leasing (car) is also reported.

10. Links to websites dedicated to the commercial and tax conditions of car leasing.

Given the limitations, rather complicated commercial and tax calculations under a leasing agreement (for cars), all available information should be taken into account. Some leasing websites provide detailed information with specific examples, such as fmleasing.pl. Also, accounting and taxes for leasing are considered in details on the websites poradnikprzedsiebiorcy.pl and ksiegowosc.infor.pl.