A car as a means of transport is increasingly an essential part of running a business. As a result, business owners regularly rotate the vehicles in their companies, which may include transferring a company vehicle to private use. Withdrawing a car from a business has significant tax consequences both for PIT (personal income tax) and for VAT. An alternative is selling the company car, which has different tax effects.
Withdrawing a company vehicle requires proper documentation and knowledge of the tax rules that govern such situations. Incorrect settlement may lead to errors in tax returns and potential sanctions from the tax authorities. That is why every business owner planning to transfer a company car to private use should learn all the legal and tax aspects of the process.
Withdrawing a company car from a business requires proper documentation and may give rise to PIT and VAT obligations. Business owners must remember to document the whole process correctly and settle all its tax consequences
Documenting the withdrawal of a company car from the business
Documenting the withdrawal of a vehicle from the business correctly is a key element of the whole procedure. Once you decide to transfer the car to private use, you must first draw up a record of the transfer of the fixed asset for own needs. This document should contain all relevant information about the vehicle being withdrawn, including its identification data, book value, degree of depreciation and the date of transfer.
The law does not provide an official template for the record of the transfer of a fixed asset for own needs – what matters is that it contains all relevant data. The document serves not only record-keeping purposes but also forms the basis for the tax settlements related to the withdrawal of the vehicle. A correctly prepared record reduces the risk of possible objections from the tax authorities about how the operation was documented.
The record of the transfer of a fixed asset for own needs must contain the exact details of the vehicle, its book value and the date of withdrawal. This document forms the legal basis for all further tax settlements related to transferring the car to private use
At the same time as drawing up the transfer record, you should remove the fixed asset from your fixed asset register. This must be confirmed by a document – the fixed asset disposal record, marked with the symbol LT. The LT document confirms the formal removal of the vehicle from the fixed asset register and is the basis for stopping depreciation write-offs from the month following the date of withdrawal.
Documenting the withdrawal requires particular attention to deadlines and procedures. All documents should be drawn up in the month in which the vehicle was actually transferred to private use. Delays in documentation may complicate tax settlements and make it harder to determine correctly when tax obligations arose.
Consequences of withdrawing a company car for PIT
Withdrawing a company car from the business for private use has specific consequences for personal income tax. The basic rule is that when a vehicle that was a fixed asset is withdrawn, the business owner does not adjust the depreciation write-offs already included in costs. This means that all write-offs made up to the time of withdrawal remain in tax-deductible costs and are not adjusted.
It is important to determine correctly when the last depreciation write-off should be made. Under the current rules, the last write-off should be made in the month the vehicle is withdrawn from the business. After that, the business owner stops making further write-offs, because the vehicle no longer serves the business.
The last depreciation write-off on the vehicle being withdrawn should be made in the month it is transferred to private use. From the following month, depreciation write-offs stop, because the vehicle no longer serves the business
If the vehicle is not fully depreciated on the date of withdrawal, the undepreciated part of its value may be a tax-deductible cost if the fixed asset is sold within 6 years of withdrawal (Article 23(1)(1)(b) of the PIT Act). This rule is of particular practical importance, because it lets you settle the remaining value of the vehicle as a cost in the future. Separate rules apply to withdrawing assets from an enterprise in estate.
A key aspect of settling the withdrawal of a car from fixed assets is that it does not always mean the end of tax settlements for that asset. Tax law provides special rules for selling the vehicle within a certain time after it has been withdrawn from the business.
Selling the car after withdrawal from the business
Selling the car within 6 years, counting from the first day of the month following the month in which the fixed asset was withdrawn, must be classified as business income under Article 10(2)(3) in conjunction with Article 14(2)(1) of the PIT Act. This means that even though the vehicle was earlier withdrawn for private use, its sale during this period will be subject to income tax as business income.
Therefore, if the sale takes place within 6 years of withdrawal, it will be subject to income tax. The revenue from the sale must be shown as other business revenue in column 10 of the KPiR (tax revenue and expense ledger) (template from 2026; until 2025 column 8). At the same time, the business owner can include in costs the remaining undepreciated initial value of the vehicle that was recorded as a fixed asset.
Selling the car within 6 years of withdrawal from the business is taxed as business income. The revenue must be shown in column 10 of the KPiR, and at the same time the undepreciated value of the vehicle can be included in costs
The practical application of these rules can be illustrated with the following example: a business owner who is not an active VAT payer bought a car worth PLN 60,000 in March 2025. In March 2026 he decided to withdraw it, when its undepreciated value was PLN 48,000 (12 write-offs of PLN 1,000 at a rate of 20% a year). After 4 months, in July, he sold it for PLN 53,000.
In this situation, when withdrawing the car, the business owner removes the vehicle from the fixed asset register and draws up a record of withdrawal of the vehicle for private use and an LT document. He then stops making further depreciation write-offs from April. In July the business owner shows revenue of PLN 53,000 in column 10 of the KPiR and at the same time a cost of PLN 48,000 in column 15, corresponding to the undepreciated value. We make such KPiR and fixed asset register entries for clients using our accounting services.
Consequences of withdrawing a company car for VAT
Withdrawing a company car from the business also has significant VAT consequences. Under the VAT Act, withdrawing from the business a company car that was a fixed asset is treated as a supply of goods subject to VAT under Article 7(2)(1) of the VAT Act.
However, the VAT obligation arises only in certain cases. The key condition is that when the vehicle was acquired, the taxpayer was entitled to deduct VAT on its purchase, import, production or its components, regardless of whether the taxpayer actually used that right. This covers both the right to a full VAT deduction and a partial deduction, for example 50% VAT on expenses for a passenger car.
Withdrawing a company car is subject to VAT as a supply of goods if, when the vehicle was acquired, there was a right to deduct VAT in full or in part. This also applies where the taxpayer did not use the right to deduct
If the taxpayer bought the vehicle on a VAT invoice and had the right to a full or partial VAT deduction on the vehicle and its components, they must charge VAT on the withdrawal of the fixed asset for private use. An example of a partial VAT deduction is a vehicle bought for the business and used for mixed purposes, both in the business and privately.
In the case of a free-of-charge transfer, the taxable amount under the VAT Act will be the purchase price of the goods (or similar goods) determined at the time of transfer (Article 29a(2) of the VAT Act), which in practice means their current market value. This means the taxpayer must determine the current market value of the vehicle on the date of its withdrawal from the business and charge output VAT on that amount.
Special cases of VAT taxation
The obligation to account for VAT also applies where the taxpayer deducted VAT on components of the car being withdrawn from the business, provided there was a right to deduct VAT on their purchase. So even where an active VAT payer bought the vehicle under a sale agreement without the right to deduct VAT, but later deducted VAT on a component of the vehicle, they must pay VAT on withdrawal.
In this case, the taxable amount on withdrawing the vehicle from the business is the market price of the component at the time of supply. This rule is meant to ensure VAT neutrality and to avoid situations in which the taxpayer could obtain an unjustified tax advantage.
The obligation to account for VAT on withdrawing a vehicle also applies where the taxpayer deducted VAT only on components of the car. The taxable amount is then the market price of those components at the time the vehicle is withdrawn
If the taxpayer deducted 50% VAT when acquiring the vehicle (Article 86a(1) of the VAT Act), when withdrawing it for private use they may consider adjusting input VAT under Article 90b of the VAT Act and showing it in the return, if the change takes place within the adjustment period – 60 months from the month of acquisition (12 months for vehicles with an initial value of up to PLN 15,000). The provision expressly settles this only for the sale of the vehicle (Article 90b(2)); for a free-of-charge transfer, it is worth confirming the right to the adjustment with an individual tax ruling (KIS).
The input VAT adjustment is proportional to the remaining adjustment period (Article 90b(4)), so its significance decreases with every month the vehicle is used. The taxpayer can compare the effects of different VAT settlement options before withdrawing the vehicle.
Procedures and documentation in practice
Implementing the procedures for withdrawing a company car in practice requires a systematic approach and knowledge of all the formalities. The process includes several key stages, which must be carried out in the right order and within the required deadlines.
The first step is to prepare the documentation that will form the basis for all further tax settlements. This documentation must be complete and prepared in line with the law, because it forms the legal basis for withdrawing the vehicle and settling all related tax consequences.
The further stages of the procedure are:
- Drawing up a record of the transfer of the fixed asset for own needs
- Removing the vehicle from the fixed asset register
- Drawing up a fixed asset disposal record (LT)
- Making the last depreciation write-off in the month of withdrawal
- Determining the VAT taxable amount (if applicable)
- Accounting for VAT on the withdrawal of the vehicle (if applicable)
- Updating the accounting and tax records
Each of these stages requires particular attention and correct execution, because errors at any of them may lead to incorrect tax settlements and potential problems with the tax authorities.
The procedure for withdrawing a company car requires seven key steps, from drawing up the transfer record, through making the last depreciation write-off, to accounting for VAT. Each stage must be carried out correctly and on time
Practical aspects and tax planning
Withdrawing a company car from the business can also be part of a tax planning strategy. Business owners can plan the timing of the withdrawal so as to minimise the tax burden or spread it over time in the way most favourable for the company.
One aspect worth considering is the timing of the withdrawal in relation to the degree of depreciation. Withdrawing a vehicle when it is largely depreciated may be more favourable for future tax settlements, especially if you plan to sell it within 6 years of withdrawal.
It is equally important to consider how the withdrawal affects VAT settlements. For taxpayers who used a partial VAT deduction when acquiring the vehicle, it is worth checking on withdrawal whether an input VAT adjustment under Article 90b of the VAT Act is available.
Managing a company's vehicle fleet in practice also requires taking into account the life cycle of each car and planning its withdrawal in a way that is optimal both operationally and for tax purposes. This may include synchronising the withdrawal of older vehicles with the purchase of new ones, which allows better management of cash flow and the tax burden.
The most common mistakes and how to avoid them
When withdrawing a company car from the business, business owners often make mistakes that may lead to incorrect tax settlements and potential sanctions from the tax authorities. Knowing the most common mistakes and how to avoid them is key to carrying out the whole process correctly.
One of the most common mistakes is documenting the withdrawal of the vehicle incorrectly. Business owners often skip the required records or prepare them incompletely, which may cause problems during a possible tax inspection. Proper documentation is the basis for all tax settlements and must be prepared in line with the law.
Another common mistake is determining incorrectly when the last depreciation write-off should be made. Some business owners continue making write-offs after withdrawing the vehicle or stop making them before the actual withdrawal, which leads to errors in tax settlements.
The most common mistakes when withdrawing a company car are incorrect documentation, wrongly determining the timing of the last depreciation write-off and overlooking VAT obligations. Avoiding these mistakes requires a thorough knowledge of the rules and a systematic approach to the whole process
For VAT, a common mistake is overlooking the obligation to charge VAT on the withdrawal of the vehicle or determining the taxable amount incorrectly. Business owners are often unaware that withdrawing a vehicle may be subject to VAT, especially if they used the right to deduct input VAT when acquiring it.
To avoid these mistakes, it is worth:
- Studying the applicable rules carefully before starting the withdrawal process
- Preparing complete documentation in line with legal requirements
- Consulting a tax adviser in case of doubt
- Keeping detailed records of all activities related to withdrawing the vehicle
- Regularly updating your knowledge of changes in tax law
Impact on accounting books and records
Withdrawing a company car from the business also requires appropriate accounting entries and updates to the records kept. The process must be reflected in the business owner's books in a way that correctly presents the economic substance of the operation and complies with accounting standards. On the VAT side, an adjustment when the car's use changes may be needed.
When the vehicle is withdrawn, appropriate accounting entries must be made to reflect the transfer of the fixed asset to private use. These entries must take into account the book value of the vehicle, accumulated depreciation and any VAT related to the withdrawal.
Particular attention should be paid to correctly recording VAT on the withdrawal of the vehicle in the books, if such an obligation arises. This VAT is a tax liability and must be properly shown in the VAT records and in tax returns.
A transport company with a fleet of 15 delivery vans regularly replaces older vehicles with newer models. When withdrawing each vehicle, the company prepares complete documentation, including a record of transfer for private use and an LT document. Thanks to this systematic approach, the company reduces the risk of errors in its tax settlements and has better control over its tax obligations related to fleet management.
Updating the fixed asset register is just as important as booking the operation correctly. The vehicle must be removed from the register in a way that ensures the operation can be fully traced and verified in the future. The register should contain all relevant information about the withdrawn vehicle, including the date of withdrawal, the book value and references to the documentation prepared.
Inspection and verification by the tax authorities
Withdrawing a company car from the business may attract particular attention from the tax authorities during tax inspections. They look at whether such operations are correctly documented and whether the tax settlements comply with the law.
During a tax inspection, the authorities may verify:
- The completeness and correctness of the documentation prepared
- Whether the withdrawal dates match the actual state of affairs
- Whether VAT on the withdrawal of the vehicle was correctly calculated and settled
- Whether the accounting entries match the source documents
- Whether any sale of the vehicle after withdrawal was correctly settled
Preparing for a possible inspection requires keeping detailed documentation and records of all operations related to withdrawing the vehicle. Business owners should keep all documents related to the purchase, use and withdrawal of the vehicle for the period required by law.
During an inspection, the tax authorities pay particular attention to the documentation of the vehicle's withdrawal, the correctness of VAT settlements and whether the dates match the actual state of affairs. Complete documentation and correct settlements reduce the risk of possible objections
It is also worth remembering that the tax authorities may ask for explanations of the business rationale for withdrawing the vehicle, especially if the operation takes place in unusual circumstances or in a way that may raise doubts about its real nature.
Planning and fleet management strategy
Withdrawing a company car from the business should be part of a broader fleet management strategy. Planning such operations in advance allows the tax burden to be optimised and cash flow to be better managed.
A strategic approach to fleet management may include:
| Planning aspect | Benefits | Risks | Recommendations |
|---|---|---|---|
| Timing of withdrawal | Tax planning | Misjudging the value | Regular vehicle valuation |
| Documentation | Compliance with the law | Incomplete documents | Standard procedures |
| VAT settlements | Minimising the burden | Calculation errors | Consulting an adviser |
| Sale after withdrawal | Additional revenue | Tax obligations | Long-term planning |
Long-term planning also allows better use of tax rules and helps avoid situations in which withdrawing a vehicle leads to unexpected tax burdens. This may include synchronising the withdrawal with other business operations or spreading operations over time in the way most favourable for the company.
Regular reviews of the vehicle fleet and assessment of whether it makes sense to keep each car in the business allow informed decisions about withdrawing them. This approach ensures that decisions to withdraw vehicles are based on rational business grounds, not just tax reasons.
