Credit or leasing? Entrepreneurs are often not sure which of these ways of financing a passenger car will be more profitable in terms of tax for their company, and as a result – it will have a more favorable impact on the final price of the company car (effective cost of purchase). Therefore, Tax Care calculated, on the example of a cheaper and more expensive passenger car, what amounts related to the purchase of a company car can be included in the tax deductible costs, thereby reducing income tax, and how much VAT can be deducted.

Tax Care compared the conditions for the purchase of passenger cars worth 65,000. PLN and 180 thousand PLN assuming that:

Tax Care compared the conditions for the purchase of passenger cars worth 65,000. PLN and 180 thousand PLN assuming that:

• in both cases the repayment lasts five years,

• the commission is 5%,

• own contribution is 10% for a cheaper car and 20% for a more expensive one

• the entrepreneur is taxed on a straight-line basis

• the car is a fixed asset for 5 years (with a loan)

We also assumed that the entrepreneur takes into account operational leasing (financial leasing is possible, but from a tax point of view it is very similar to credit, and definitely less popular among lessees).

See: Regular price increases are the key to success

The simulation carried out by Tax Care shows that the effective cost of purchasing a car worth 65,000 on credit. PLN 61.8 thousand Golden. The same car leased by the entrepreneur would cost 61.3 thousand. PLN, i.e. it would be about PLN 500 cheaper. In this case the difference is therefore small. It is different, however, with the effective cost of buying a car of a much higher value, at a price of 180,000. Golden. At this price of the car, the effective cost of its purchase is 193.4 thousand. PLN for credit and PLN 175.8 thousand PLN in the case of leasing, which is over 17.5 thousand. PLN difference in favor of leasing. So, despite the reduction in income tax and VAT deduction, the final cost of buying a car on credit exceeded the original value of the car.

Loan for a new passenger car for the company (in PLN, for 5 years, commission 5%)

Loan for a new passenger car for the company (in PLN, for 5 years, commission 5%)

(the company is taxed with a 19% flat rate, the car is the company’s fixed asset for 5 years)

Car value (gross)

Total cost of credit (interest plus commission)

Tax shield

65 thousand PLN (own contribution 10%)

PLN 17,352.02

VAT: PLN 6,000

Income tax: 3,296.88 (interest and commission) and PLN 11,210 (depreciation)

Total: PLN 20,506.88

180 thousand PLN (own contribution 20%)

PLN 42 712.56

VAT: PLN 6,000

Income tax: PLN 8,115.39 (interest and commission) and PLN 15,200 (depreciation) *

Total: 29 315.39 PLN

* assuming that the average euro exchange rate adopted for determining the depreciation limit is PLN 4

 

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