Optimizing company car costs - Leasing vs. buying vs. using a personal vehicle - a practical guide

VEHICLE LEASING - OPERATING OR FINANCE LEASE?

Leasing is a contractual arrangement between a lessor (the financing company) and a lessee (the individual or business using the asset). The lessor purchases a specified asset (e.g., a car) and provides it to the lessee for a defined term in exchange for monthly lease payments. This form of financing allows the lessee to use a high-value asset without making a one-time purchase or a large upfront capital outlay.

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Two primary types of leasing:

• Operating lease - The lessor retains legal title and claims depreciation; the lessee uses the vehicle and pays instalments according to the schedule.‍
• Finance lease - The lessee recognizes and depreciates the vehicle; at the end of the term, ownership typically transfers to the lessee.

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How else do these two structures differ?

Primarily, in the expenses you can treat as tax-deductible.

• Operating lease - You may deduct the upfront fee, the lease instalments (both principal and interest components), and the buyout amount: up to PLN 10,000 in one go; above that, through depreciation charges
• Finance lease - You may deduct only the interest portion of the lease instalments plus depreciation of the vehicle.

Lease fees and running costs (fuel, car wash, spare parts, servicing) are deductible at:

• 75% if the car is used both privately and for business (mixed use),
• 100% if the car is used exclusively for business.

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VAT deduction

You may recover input VAT on the invoice for the upfront fee, the monthly lease payments, and the buyout invoice.Depending on how the vehicle is used, you can also recover VAT on running expenses and lease charges - 50% of the VAT shown on the invoice for mixed (business and private) use, or 100% for exclusive business use.

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PURCHASING A CAR

When you purchase a car for your business, you must recognize it as a fixed asset and depreciate it over several years. The tax-deductible expense is the depreciation charge, subject to a vehicle value cap of PLN 150,000 or PLN 225,000.

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VEHICLE VALUE CAP

Operating costs for business cars - such as depreciation charges and lease payments - may be treated as tax-deductible only up to a limit set by the Personal Income Tax Act.

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Current limits:

• PLN 225,000 - for battery-electric and hydrogen vehicles
• PLN 150,000 - for all other passenger cars (internal-combustion and hybrids)

⚠️Note: If the vehicle’s value does not exceed the applicable cap, lease payments and depreciation are fully deductible. If the vehicle’s value exceeds the cap, you must apply a proportional deduction to determine the allowable tax cost.

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Depreciation is deductible only up to the vehicle value cap; the proportional cap does not apply to depreciation.

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💡 High buyout amount (up to PLN 150,000)? In that case, the car is treated as your asset and depreciated up to that amount, which increases your total tax-deductible expenses in the business.

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📊 For high-value vehicles, an operating lease is generally the more cost-effective option.

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Changes to the limits from 2026

As of 1 January 2026, new limits will apply, which will particularly affect entrepreneurs planning to finance an internal-combustion vehicle. The new limits are:

• PLN 225,000 - for electric and hydrogen vehicles,
• PLN 150,000 - for internal-combustion cars emitting less than 50 g CO₂/km,‍
• PLN 100,000 - for internal-combustion cars with emissions of 50 g CO₂/km or more.

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The sale of a company vehicle also entails personal income tax (PIT) and VAT obligations, so it is important to analyse which form of vehicle financing will be more advantageous if a sale is planned.

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USING A PERSONAL CAR IN YOUR BUSINESS

Already have a personal car and wondering whether you can use it for business purposes? There are several ways to account for the operating expenses of a personal vehicle used in your business.

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Introducing a private car into fixed assets

You can bring your private car into the business by entering it in the fixed assets register. This allows you to treat 75% of operating expenses - fuel, parts replacements, servicing, etc. - as tax-deductible and to recover 50% of VAT on those expenses.

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To recognise the car for tax purposes, you need:

• Determine the initial value of the vehicle - based on the purchase price if you can document it, or according to the current market value.
• A statement transferring the car to the business assets (using our template).
• Entry of the car into the fixed assets register of the business

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If you choose to use the car exclusively for business to benefit from 100% deductions, your obligations are:

• File the VAT-26 form with the tax office.
• Maintain a vehicle mileage log (“kilometrówka”).

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What about selling the car?

Once introduced, the car becomes a business asset, so the sale must be invoiced. The proceeds from the sale constitute business income and are taxed under your business’s applicable tax regime. You must also charge and remit VAT on the sales invoice if you are VAT-registered and recovered input VAT on the vehicle’s purchase.

When selling a company car, an input VAT adjustment period applies. If the car’s value exceeds PLN 15,000, the adjustment period is 5 years. This means that if you sell the car within 5 years of purchase and previously deducted input VAT on the purchase invoice, you must adjust the input VAT.

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When is the sale not taxed?

You should transfer the car back to your private assets and wait 6 years from the date of withdrawal. After that, the sale proceeds will not be subject to income tax or VAT.

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Using a personal car in the business

You may use a personal vehicle in your business without entering it into the fixed assets register. Operating expenses can still be recognized, but at a different ratio - 20% of these expenses are tax-deductible, and you may recover 50% of the VAT. Selling the car does not trigger business income tax.

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Choosing how you finance and account for a company vehicle has a material impact on tax deductibility and VAT recovery. If you’re unsure which option to pick, contact us - we’ll help you identify the optimal solution tailored to your business profile and future plans.