Shifting gear

After an outcry from Polish entrepreneurs and businesses, the Ministry of Finance has withdrawn the idea of taxing the use of company cars for private purposes, a proposal which contravened the sixth EU directive. At the same time, the Ministry will allow for a complete rebate on all of the 22-percent VAT that businesses are currently required to pay on new company cars.

According to the previous draft, all businesses giving employees use of a company car would be taxed, regardless of whether or not the car is used for private purposes. The Ministry also wanted to hit up employees for private use of company cars. Each would have the tax deducted from his or her income by the employer. Now the Ministry wants companies to give statements to the tax office only when company cars are used by employees for private purposes.

In introducing the regulations, the Ministry hopes to lower costs for employers.

"The idea of introducing statements is good because it rejects the presumption that each company car is used for private purposes," says Roman Rosiak from PricewaterhouseCoopers. "The Ministry should analyze which companies ought to submit statements. Those who grant company cars [for personal purposes] will have two obligations [i.e., submitting the statement and paying the tax], those who don't give the statement, will have none."

The Finance Ministry says it is aware that the new system could lead to abuses of the law, as companies unwilling to pay the tax could simply neglect to turn in the required statement. The Ministry says that more frequent audits from the tax office will enhance the observance of the law.