The secondary car market in Poland is doing very well. Hundreds of thousands of cars change hands every year. The most popular ways of documenting the purchase of a used car are a sales contract, a VAT invoice and a VAT invoice.
Buying a used car is not difficult. Unless the technical condition leaves much to be desired and we have no objections to the value of the car, we have no choice but to prepare the sales document and make the purchase . Which trade document should we choose? Which is the best? Which document should an entrepreneur choose, and which one will be more beneficial for a private person?
In the Polish legal system, we can buy a car in several ways. The most common methods:
- contract of sale,
- deed of Gift,
- legacy,
- VAT,
- VAT invoice.
Depending on the legal personality of the car buyer or seller, individual methods will be more or less convenient. The main legal entities in Poland are:
- A natural person, i.e. an ordinary citizen,
- A legal entity, such as a company or an NGO.
An individual buying a used car from another individual will likely choose a sales contract . If she decides to buy a car from the company, it will most likely be a VAT invoice. The purchase of a used car in a second-hand store can be confirmed by a tax invoice with VAT. For an individual, each of these forms has advantages and disadvantages, which we will discuss below.
The situation is somewhat different when the buyer is a legal entity, that is, a company or organization. A legal entity keeps accounting records and must document every purchase and expense. Such an operation also creates certain obligations before the tax inspectorate .
What information should be contained in a document on the sale of a car in Poland?
Buying a used car is a procedure that has significant legal implications . Therefore, it is important that the sales document clearly shows who sold what and to whom.
1. Date and place of drawing up the document .
2. Identification of the parties to the agreement – details of the seller and buyer:
- for a natural person – surname, first name, patronymic, PESEL number, legal address, address of residence, type and number of an identity document,
- for a legal entity – name, NIP, REGON, legal address.
If there are several owners of the vehicle, it is necessary to specify information about all persons.
3. Specification of the object of sale – in the case of a car, it will be the license plate number, VIN number, brand, model.
4. Declaration of the owner of the vehicle on the right to own and dispose of the vehicle.
5. The cost of the vehicle, i.e. the price of the transaction .
6. Method of payment for the transaction (cash/transfer/barter).
7. Declaration of which party will pay the tax on civil transactions – It is assumed that this obligation rests with the buyer, but the parties can agree on something else.
8. List of attachments – civil liability insurance, vehicle card (if issued), registration document, service book, PDP certificate, etc.
Who is the contract of sale in Poland for?
A contract of sale is a relatively simple document, and the Civil Code allows some freedom in the formulation of its provisions. In most cases, contractors use sales contract templates or a generator. An example of a sales contract may look like this:
The form of the contract of sale is regulated by the Civil Code. After signing, the parties undertake to comply with its provisions. Thanks to a certain freedom of form, the employment contract allows the conclusion of additional provisions. Thanks to them, the buyer can protect himself from fraud attempts or the purchase of a defective car. The seller, on the contrary, can make sure that the buyer pays the due amount on time, and the technical condition of the vehicle is known to him.
Pros:
- simplicity,
- the design allows you to add additional information,
- the most effective form of transaction protection against fraud,
- available to both individuals and companies.
Cons:
- need to pay PCC tax,
- the need for additional VAT calculation for companies,
- must read carefully
- the most popular form among fraudsters.
Buying a used car in Poland on a consignment note
Businesses can purchase a used car for cash payment or with a car loan or operational leasing. It is assumed that such a purchase is confirmed by an invoice. Polish legislation does not oblige the company to document the purchase of cars with a VAT invoice. The c/s contract may well be an accounting document. Nevertheless, the VAT invoice is the most popular form of documentation for the purchase of a car.
A VAT invoice can look like this, for example:
If an entrepreneur wants to deduct 100% of VAT when purchasing a used car, he must:
- set the type of vehicle as official,
- report the vehicle to the tax office (VAT-26 declaration),
- draw up rules for using a car at the company,
- keep track record.
Pluses
- the possibility of the buyer evading the PCC tax,
- the possibility of reducing VAT tax liabilities for an entrepreneur.
Cons
- when buying, 23% of the initial cost must be added to the net price,
- in order to deduct all VAT, the car must be used 100% for commercial purposes,
- limited form and no possibility to add additional records.
What is a VAT invoice and who benefits from it?
This is the least popular form of documentation of sales by entrepreneurs and car dealerships. In this case, if it is possible to issue a VAT invoice, the seller pays tax only on the markup. In this case, the margin is the difference between the purchase price of a used car and its sale price .
Example: Mr. Vlodzimiezh is the owner of a used car dealership. He bought a 2008 Volkswagen Passat in Germany for PLN 8,000. After bringing it to Poland and completing all the documents, I put it up for sale for 11,000 zlotys. Thanks to the VAT invoice, he will pay VAT on the amount of PLN 3,000 (the markup is the difference between the purchase price and the sale price). In the case of a tax invoice, he would have to pay VAT on the full amount.
A VAT invoice may look like this:
Who can use a tax invoice with VAT? According to the regulations, these are entrepreneurs who:
- provide tourist services,
- trade in used goods,
- they deal in collectibles, antiques or works of art.
According to Art. 120 of the Law on VAT, goods that were in use are movable material goods, suitable for further use in their current state or after repair, except for those specified in points 1-3 and except for precious metals and precious stones . The goods listed in items 1-3 are antiques, works of art and collectibles.
Looking at the definition, we can easily conclude that the VAT invoice can be used by companies dealing in used cars. And this is what happens. A VAT invoice is a common form of documentation used by car dealers and used car dealers.
Pluses
- clear honesty and transparency of the seller,
- lower VAT payable by the seller,
- higher costs for the buyer, which leads to lower income tax,
- simple and clear invoices.
Cons
- lack of possibility to deduct VAT from the buyer,
- the buyer cannot deduct VAT from the costs associated with this service,
- rarely used, few organizations use it,
- sellers may not want to list it (you can see a copy).
Sales contract, invoice or VAT markup?
Which sales document the parties to the agreement will choose depends only on them.
It will be easier with a sales contract . Very often, trade takes place between two people. None of them will create a business just to issue a VAT invoice. On the basis of the sales contract, the ownership of the car can be easily transferred, and the form of its registration leaves some freedom.
A VAT invoice is most typical for business activities that are not related to the trade in cars. The company needs cars. Having a car purchased for cash, on credit or leased is an expense for the company. Selling such a car is income. Everything must be documented and calculated, and the VAT invoice is the most convenient form.
A VAT invoice is a popular form of sales documentation among companies that are solely engaged in the trade of used cars . The large volume of sales with relatively lower VAT charges makes this form more profitable for these companies than a normal VAT invoice.
When do you not pay PCC tax at the tax office?
The civil transaction tax, also known as the wealth tax, is a strange tax. On the one hand, we spent money on the car, but on the other hand, according to the Treasury, we got richer, and you deserve money for that.
Its activities are regulated by the Law of September 9, 2000 on tax on civil transactions. It applies to sales contracts concluded by persons who are not professionally engaged in commercial activities . The amount of PCC tax is 2% of the value of the vehicle entered into the contract. Not much, but with large sums it brings good money. Besides, it’s a tax, and nobody likes paying taxes.
A vehicle is subject to PCC tax if, at the time of sale:
- was in Poland
- was abroad, but the buyer lives or has a legal address in Poland, and the contract was concluded in Poland.
The first conclusion is obvious – you will not pay wealth tax if you conclude the contract while staying abroad and the car is registered abroad. However, it is necessary to take into account the need to pay an excise duty – 3.1% for vehicles with an engine up to 2.0 liters and 18.6% for a larger volume.
You also do not pay tax if you buy a car from a legal entity, i.e. from a company or from a dealership if the dealership owns the car . In a situation where the commission is an intermediary in the purchase and sale, and the owner of the vehicle is an individual, you will have to pay the PZP.
You also don’t pay PCC tax when you buy a used car worth less than PLN 1,000 .
The amount less than PLN 1,000 must correspond to the actual value of the car. An attempt to artificially understate the initial value for the purpose of tax evasion can be detected by the tax authorities, questioned, and the incident itself is qualified as an attempt at fraud. Then you will have to pay not only the tax, but also a fine, and if the amount of fraud is significant, you may end up in prison.
Disabled persons are exempted from taxation by civil law agreements.
What are the obligations for buying a car in Poland?
First, every car that drives on public roads in Poland must be registered. This means that its owner must be known. Each change of owner must be reported to the relevant Department of Transport within 30 days from the moment of sale or purchase of the vehicle . You can report the sale of a vehicle in person or online. Neglecting this duty can lead to an administrative fine from 200 to 1000 zlotys!
Secondly, every registered vehicle must have valid civil liability insurance – OC. Lack of OC may result in a fine from the Insurance Guarantee Fund. The owner of the vehicle must notify his insurer of its sale within 14 days from the moment of sale.
Thirdly, if the party to the transaction is a legal entity, then the car must be entered in the register of fixed assets and VAT must be paid (if any). A car that has been used 100% for commercial purposes allows you to deduct all VAT. so-called mixed use allows deduction of 50% of the due VAT.
Fourthly, the purchase of a used car through the execution of a sales contract imposes on one of the parties the obligation to pay a tax on civil transactions in the amount of 2% of the value of the vehicle specified in the contract. As a rule, this is the buyer, unless the parties have agreed otherwise.
Fifth, when importing a car from abroad, you also need to take care of customs documents.
importantly! If the cars were taken for the company and 100% VAT was deducted from them, it is better not to drive them for private purposes. Maybe the tax office will never check the use of the car, or maybe someone will report it and you will have to pay the overdue VAT along with the tax fraud penalty.
The most common questions about buying a used car in Poland
Is it possible to conclude a contract of sale by hand in Poland ?
So. If it contains data listed in the Civil Code, it can be recorded manually.
Can I issue an invoice and a sales contract in Poland at the same time ?
Nothing prevents you from issuing a VAT invoice and drawing up a sales contract when buying a car. This can be beneficial as additional information can be included in the sales contract that will not be included in the invoice.
Is a notary needed to sign a sales contract in Poland ?
NO. A contract for the sale of a car is concluded between two legally competent parties (contracts concluded by them have legal force).
Can I, as an individual, buy a car on a consignment note in Poland ?
Yes, you can, and what’s more, when you buy a used car from an entrepreneur, you don’t pay tax on civil transactions.
Can a company buy a car under a sales contract in Poland?
Of course, when buying a car for a company, we can use a sales contract, but due to the possible need to pay VAT on this purchase, it is better to use a tax invoice.
As an individual, can I issue a VAT invoice for a car in Poland?
In some cases, an individual can issue VAT invoices without having a registered business activity, but the trade in used cars does not apply to such cases.