Business trip by private car

In smaller companies it is not unusual for an entrepreneur to make a business trip in his private car. Of course such a trip is connected with incurring certain expenses. These are for example purchase of fuel, parking fees or freeway tolls. Is it possible to deduct VAT on the above?
A general rule included in the VAT Act states that VAT may be deducted on the purchase of goods and services to the extent in which they are used for activities subject to VAT (with certain exceptions).
In case of cars treated as passenger cars for tax purposes, the legislator has provided for certain limitations (Article 86a of the VAT Act). However, these regulations do not say whether they cover only motor vehicles belonging to the taxpayer and constituting his fixed assets, hired or leased (so – generalizing – only to company cars) or his private cars.
Therefore, it seems that they can also be applied to the entrepreneur’s private cars which are used for company purposes.
As a rule, taxpayers may deduct 50% of input VAT on expenses connected with the use of private cars. This concerns, among others, expenditures for: purchase/lease/rental of a vehicle, purchase of fuels used for its propulsion, repair/maintenance services or purchase of other goods and services related to their operation or use (see Article 86a(2) of the VAT Act). Such expenses also include freeway tolls or parking fees (see Ministry of Finance information brochure “New rules for VAT deduction on car loans”). “New rules for deducting VAT on car-related expenses”).
Is it possible to deduct VAT from expenditure on operation of a private car? Yes, if an entrepreneur uses it in the company for taxable activities. In such a case VAT may be deducted in the amount of 50% of its value as indicated in the purchase invoices. A 100% deduction is unlikely to be possible as the car would have to be used exclusively for business activities.
Therefore, if a business trip taken by a businessman in his private car is connected with the performance of taxable activities, it seems that there are no obstacles for him to deduct 50% of the VAT included in the purchased goods and services connected with its exploitation during this trip (e.g. on fuel, tolls or parking fees).
However, he has no right to deduct VAT on expenses related to private travels as these are not connected with taxable activities.
Is it possible to fully deduct VAT?
In certain cases it is possible to deduct 100% of VAT on expenses connected with passenger cars. The legislator allows for the above under the condition that a given car is used only for business activity, which will be confirmed by keeping a mileage register of the vehicle and the conditions of its use. Moreover, such a vehicle must also be reported to the tax authorities.
In case of private cars, these conditions are generally not met. As a rule, such cars are used first of all for private purposes of their owner and not for business purposes. Therefore full deduction of VAT will be rarely observed here. Generally, when using a private car for business purposes, entrepreneurs will limit VAT deduction to 50% of its value resulting from purchase invoices.
How to document?
The basic document authorizing VAT deduction on purchases made is an invoice issued in accordance with the provisions of the VAT Act. Legislator does not require to mention the registration number of the vehicle to which the purchase relates. However, it is advisable to state this number so that there is no doubt as to which vehicle the purchase was made for (a taxpayer can make an annotation on the invoice himself in this respect).
Freeway crossings may be documented with receipts issued at gates, which also entitle to VAT deduction.

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