Selling a company car is a process that requires particular attention from a tax perspective. A vehicle that is part of business assets has specific financial consequences when it is sold, which can significantly affect the company's tax burden. Business owners often look for legal ways to minimise this burden, which requires in-depth knowledge of tax rules and strategic planning.
A company car is not only a work tool but also a business asset subject to specific recording and settlement rules. From the moment the vehicle is entered in the fixed asset register, every operation involving it – from depreciation to sale – has tax consequences. Understanding these mechanisms lets you plan vehicle sales and use only the solutions the rules expressly provide for – without artificial arrangements that the tax authority may challenge as tax avoidance (Article 119a of the Tax Ordinance Act (Ordynacja podatkowa)).
Basic rules for taxing the sale of a company car
A vehicle entered in the fixed asset register is part of the business assets and is subject to specific tax rules. A business owner using a car in their business can benefit from a number of tax advantages that directly reduce the tax base.
A company car reduces income tax through depreciation write-offs and by treating fuel and running costs as tax-deductible costs. These benefits are available throughout the period the vehicle is used in the business
Depreciation is a key element of settling a company car, allowing the purchase price or initial value determined in another way to be gradually recognised in business costs. The process is spread over time and systematically reduces the tax base over the vehicle's period of use.
Running costs of the vehicle, such as fuel, repairs, insurance and roadworthiness tests, can be treated as tax-deductible costs (for a passenger car also used for private purposes – 75%, Article 23(1)(46a) of the PIT (personal income tax) Act). This significantly affects the cost-effectiveness of running a car in a business, especially when the vehicle is used intensively for business purposes.
However, the benefits of owning a company car come with specific tax obligations when the vehicle is sold. The net value of the sale (for an active VAT payer – excluding output VAT, Article 14(1)) becomes business income (Article 14(2)(1)(a) of the PIT Act), which must be reported in the relevant tax records.
Income tax on the sale of a company car
The sale of a vehicle that is part of business assets generates revenue taxed at the rate applicable to the form of taxation chosen by the business owner. This mechanism is a consequence of having previously used the tax benefits of owning a company car.
The net value of the sale of a company car is business revenue, which must be entered in column 10 of the KPiR (tax revenue and expense ledger) as other revenue (ledger template from 2026; up to 2025 – column 8). At the same time, the undepreciated value of the vehicle becomes a tax-deductible cost at the time of sale (Article 23(1)(1)(b)), and for a passenger car – in the part corresponding to the limit in Article 23(1)(4) (Article 24(2a))
Settling the sale of a company car involves two main elements. First, the whole amount received from the sale is taxable revenue, regardless of whether the transaction produces a profit or a loss. Second, the undepreciated value of the vehicle sold becomes a tax-deductible cost (for a passenger car more expensive than the limit – only proportionally), which partly offsets the revenue.
The difference between the sale revenue and the undepreciated value of the vehicle determines the final effect of the transaction on the tax base. If the sale price exceeds the vehicle's book value, a taxable profit arises. Otherwise, when the vehicle is sold below book value, the loss can be treated as a tax-deductible cost.
| Transaction type | Effect on the tax base | Tax consequences | Documentation |
|---|---|---|---|
| Sale above book value | Increase in the tax base | Additional tax to pay | Sales invoice, revenue records |
| Sale below book value | Decrease in the tax base | Lower tax to pay | Sales invoice, cost records |
| Sale after full depreciation | Full amount as revenue | Whole sale amount taxed | Sales invoice, no offsetting costs |
Legal ways to reduce income tax
The rules provide no "relief" for selling a company car, but they set out when the sale of a vehicle stops being business income. One such case is withdrawing the vehicle from business assets into the owner's private assets and selling it after the period set out in the Act.
The sale of a car withdrawn from the business is not business income only once 6 years have passed between the first day of the month following the month of withdrawal and the day of sale (Article 10(2)(3) of the PIT Act). A sale before this period ends is still business income
It is worth documenting the withdrawal of the car from business assets with a written statement (the rules do not provide a template) and by removing the vehicle from the fixed asset register. An active VAT payer who had the right to deduct VAT on the purchase of the car (in full or in part) must also charge VAT on the transfer of the vehicle for private purposes (Article 7(2) of the VAT Act). From that moment the car stops being a business asset and can be treated as the owner's private property.
The key element is the time requirement – 6 years must pass from the first day of the month following the month in which the car was withdrawn from the business to the day of sale. Only when this condition is met does the sale not generate business income.
Another option sometimes used is gifting the vehicle (e.g. to a family member). The recipient's sale of the car is not the donor's income, but for the recipient a sale within half a year from the end of the month in which the gift was received is taxable, and the costs are, in principle, only outlays (Article 10(1)(8)(d), Article 24(6)). If the gift and quick sale serve mainly to get around the 6-year period (e.g. the sale proceeds go back to the donor), the authority may treat the arrangement as artificial and apply the general anti-avoidance rule (Article 119a of the Tax Ordinance Act).
- Prepare a statement on withdrawing the vehicle from the business
- Update the fixed asset register by removing the car
- Transfer the vehicle to private assets, settling VAT on the transfer if a deduction was available (Article 7(2) of the VAT Act)
- Wait a full 6 years from the first day of the month following the month of withdrawal
- Sell the car as a private person – without business income
VAT rules on the sale of a company car
VAT rules require active VAT payers to charge VAT on the sale of a vehicle that is a fixed asset of the business. As a rule, this applies regardless of how the vehicle was acquired and the history of input VAT deductions – with the exception described below.
An active VAT payer selling a vehicle that is a fixed asset of the business as a rule charges the standard VAT rate of 23 percent – also where only a partial VAT deduction was available on purchase, or none at all, but the car was used for taxable activities. The exception is the exemption under Article 43(1)(2) of the VAT Act
The standard VAT rate of 23 percent applies to most sales of company cars; for a buyer who is an active VAT payer it is usually deductible input VAT, and for the seller it is output VAT added to the price. This obligation applies even where the business owner had no right to deduct input VAT on purchase but used the car for taxable activities.
The VAT exemption for the sale of a company vehicle is available only in very limited cases. To use it, two strict conditions concerning both the purchase and the use of the vehicle must be met at the same time (Article 43(1)(2) of the VAT Act).
The VAT exemption on the sale of a company vehicle applies only if the business owner had no right to deduct input VAT on purchase and the car was used exclusively for VAT-exempt activities
In practice this means that even if the business owner bought the car from a private person under a sale agreement and did not deduct VAT on purchase, but used the vehicle for taxable activities, a sale within the business must be subject to VAT. Selling a car that did not belong to the business is settled differently – we explain this in our article on settling the sale of a private car in PIT.
When the sale of a car is not subject to VAT
The VAT rules provide no way to "avoid" the tax, but the consequences depend on whether the vehicle is sold from business or private assets. What matters most is whether a VAT deduction was available on the purchase of the car.
If the business owner transfers the vehicle to private assets and had no right to deduct VAT on the purchase of the car (or its component parts), the transfer itself is not subject to VAT (Article 7(2) of the VAT Act), and a later sale from private assets is not an activity of a VAT payer.
Transferring a vehicle to private assets is VAT-neutral only if the business owner had no right to deduct VAT on the purchase of the car or its component parts. Otherwise VAT must already be settled on the transfer for private purposes itself (Article 7(2) of the VAT Act), so the transfer does not eliminate the tax
This limitation applies where the business owner had the right to deduct VAT on the purchase of the car – including a partial deduction (e.g. 50%). In that case transferring the vehicle from business to private assets is taxed as a supply of goods, because the business owner previously benefited from the VAT deduction. VAT deductions on fuel or servicing do not matter here – they are not component parts of the vehicle.
In addition, the sale of a car by active VAT payers requires a proper marking in the tax records. The transaction should be marked with the GTU_07 code in the records part of the JPK_V7 file (VAT return with records, SAF-T file), which is a mandatory element of tax reporting.
A business owner running a trading business bought a car from a private person for PLN 80,000 with no option to deduct VAT. They used the vehicle for 3 years to visit customers, deducting VAT on fuel. Before the sale they transferred the car to private assets – the transfer was not subject to VAT because there was no right to deduct on purchase, and fuel is not a component part of the vehicle (Article 7(2) of the VAT Act). The sale for PLN 50,000 from private assets therefore did not require VAT to be added, but for PIT purposes – as a sale within 6 years of withdrawal – it was still business income (Article 10(2)(3) of the PIT Act).
VAT adjustment on the sale of a company car
The sale of a company vehicle may involve a VAT adjustment – depending on the situation, in the business owner's favour or not. This depends on several key factors relating to how the vehicle was acquired and used.
The adjustment most often concerns a situation where 50 percent of VAT was deducted on the purchase of the vehicle and a taxable sale takes place within the adjustment period. The vehicle is then treated as used exclusively for business purposes until the end of that period, and the taxpayer is entitled to a proportional deduction of the remaining part of the VAT (Article 90b(1)(2) and (2) of the VAT Act). The adjustment period is 12 months for vehicles with an initial value of up to PLN 15,000 and 60 months (5 years) from the month of purchase for vehicles above that amount (Article 90b(1) and (6)).
The VAT adjustment on the sale of a company car depends on the type of business, the way VAT was deducted, how long the vehicle was used in the business and the value of the car. For a vehicle with a 50 percent VAT deduction, a taxable sale within the adjustment period gives a right to an additional deduction, not an obligation to repay tax
The VAT adjustment mechanism aims to align the original tax deduction with the actual use of the vehicle in the business. If a car with a full (100%) VAT deduction began to be used also for private purposes within the adjustment period, the taxpayer must adjust the deducted tax (Article 90b(1)(1)), which means repaying part of the tax deducted earlier.
The type of business has a significant effect on how VAT on a company car is settled. Business owners with mixed activities, covering both taxable and VAT-exempt transactions, are subject to special rules on input VAT deductions and adjustments (Article 90b(5), Article 91 of the VAT Act).
- Check how VAT was originally deducted on the purchase of the vehicle
- Determine the value of the car to establish the adjustment period
- Analyse the actual use of the vehicle in the business
- Calculate any VAT adjustment payable or refundable
- Include the adjustment in the VAT settlement for the relevant period
Documenting the sale of a company car
Properly documenting the sale of a vehicle that is part of business assets requires specific accounting and tax procedures. The process includes not only issuing a sales invoice but also recording the transaction correctly in the business's accounting and tax records.
Issuing a sales invoice for a company car requires taking the specifics of the transaction into account. The document must contain all elements required for VAT invoices, including the correct marking of the transaction and the correct calculation of VAT at the applicable rates.
An invoice issued for the sale of a company car is entered in the VAT sales register and in column 10 of the KPiR as other revenue. At the same time, the undepreciated value of the vehicle is entered in column 15 of the KPiR as other expenses (ledger template from 2026, Journal of Laws (Dz.U.) 2025 item 1299; up to 2025 – columns 8 and 13)
Accounting software usually records the sale of a company car once the transaction data has been entered correctly. The sale revenue goes into the relevant column of the tax revenue and expense ledger, while the undepreciated value of the vehicle is recognised as a tax-deductible cost. We book such transactions, including the VAT settlement, on an ongoing basis as part of our accounting services.
The fixed asset register must be updated when the vehicle is sold. The car must be removed from the register with the reason for removal and the date of sale. This procedure is key to keeping the accounting and tax records correct.
The sale of a company car also requires a proper marking in the documents submitted to the tax authorities. The transaction must be marked with the GTU_07 code in the JPK_V7 file, which allows the tax authorities to monitor this type of transaction.
Tax planning when selling a vehicle fleet
Business owners with a larger number of company vehicles can plan the sale of the fleet in advance. Long-term planning and spreading transactions over time make it easier to forecast the tax burden.
Spreading vehicle sales over different tax years allows better management of the tax base and can limit the effects of tax progression. This is particularly important for business owners taxed under the general rules, where higher revenue can lead to higher tax rates.
Planning the sale of a vehicle fleet makes it possible to spread the tax burden over time. For vehicles withdrawn from business assets, keeping the 6-year period between withdrawal and sale is key
Gifting vehicles can be part of succession planning or transferring business assets. However, transferring vehicles to family members who run a business requires analysing the consequences for both sides: VAT on the gift if a deduction was available (Article 7(2)(2) of the VAT Act), inheritance and gift tax for the recipient and the depreciation rules for the recipient.
Analysing the life cycle of individual vehicles in the fleet allows the timing of the sale to be planned optimally. Taking into account the degree of depreciation, technical condition, running costs and the forecast market value supports decisions that maximise economic benefits.
Consulting a tax adviser when planning the sale of a larger number of vehicles makes it possible to check the tax consequences before the transaction. An analysis of the business's tax situation helps choose solutions that comply with the rules and suit the specifics of the business.
