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How to assess the VAT on the assignment of a car lease?

1. What is the assignment of a lease?

The assignment of a lease involves the transfer or surrender of the leased object (such as a car) and the associated obligations (most commonly, instalment payments) to another party. In legal terms, the new lessee acquires receivables from the assignor and becomes the possessor and user of the leased object.

2. Lease assignment and VAT

A lessee who has been using a leased asset under a lease agreement, in exchange for transferring rights from the lease agreement to a buyer, should receive compensation. The amount of compensation for the lease assignment (also known as consideration) should be treated as a sale subject to VAT at the standard rate of 23%. Consequently, there should be no correction of past tax settlements. The lessee also does not need to include lease instalments or deducted VAT in the cost of revenue. However, the buyer of the leased asset will have the right to deduct the VAT charged on the lease assignment agreement, subject to general rules (with a deduction limit of 50% if the vehicle is used for both business and private purposes).

3. VAT correction

In particular, in the case of the assignment of an operational lease agreement, there will be no possibility of correcting the input tax, as provided for in the case of a change in the intended use of the vehicle (i.e., for use exclusively in business activities, not in a mixed manner – this presumption occurs in the case of selling a car). The correction involves the ability, when using a car for both private and business purposes, to deduct 50% of the VAT charged on invoices related to the use of the car, including invoices for vehicle lease instalments. In the case of changing the vehicle’s intended use to be solely for business purposes, there is an opportunity to deduct 100% of the charged VAT. If such a change from mixed use to exclusive business use occurs during the lease, there is a possibility of an increasing correction of VAT. The increasing correction involves increasing the deductible VAT on the purchase of the car by the amount of VAT when changing the vehicle’s use.


  • In January 2021, the taxpayer purchased a passenger car for a net amount of 100,000.00 PLN + 23,000.00 PLN (23% VAT). The vehicle was used by the taxpayer for both private and business purposes. They were entitled to a VAT deduction of 50%, amounting to 11,500.00 PLN. The car was sold in May 2022, and the sale was subject to 23% VAT.
  • The correction period is 60 months (from January 2021 to December 2026). The taxpayer has 42 months remaining (from May 2022 to December 2026).
  • The VAT that has been deducted so far, i.e., 11,500.00 PLN, is subject to correction.
  • The correction should be calculated as follows: (deducted VAT / 60) x the number of remaining correction months.
  • In this example, it would be (11,500.00 / 60) x 42 = 8,050.00 PLN.

The taxpayer will have the option to correct the input VAT on the purchase of the car in January 2021 by 8,050.00 PLN. Similarly, in the event of a change in the vehicle’s designated use, from solely business to both business and private, the taxpayer will need to reduce the deducted VAT at the time of vehicle acquisition. The aforementioned correction could be carried out by the taxpayer based on Article 90b of the VAT Act when, from the acquisition, import, or commencement of use of the car until its sale (or change in use in another way), no more than 60 months have elapsed.

In such a case, it is necessary to make a correction to the input tax (deducted at 50%) for the remaining period until the end of the correction period. However, Article 90b(1) of the VAT Act, as mentioned earlier, refers to the correction of input VAT that was deducted at the time of the acquisition, import, or production of the car.

The VAT correction, therefore, applies only to the purchase of the car. It does not include the input tax from leasing, rent, or fuel expenses. According to the interpretation of the Director of the National Fiscal Information on May 24, 2021 (reference: 0114-KDIP4-2.4012.204.2021.1.MC), in light of Article 90b(1) of the law, expenses related to the use of the vehicle under a lease, operational lease, or a similar agreement are not subject to correction. Deductions for these expenses occur continuously (unlike ownership acquisition – a one-time, upfront deduction). Therefore, there is the possibility of verifying this deduction continuously. In the month of changing the vehicle’s designated use, the taxpayer should adjust the deduction amount.

Importantly, in the case of selling the vehicle during the correction period, there is a statutory presumption of a change in the vehicle’s use to exclusively for business purposes until the end of the correction period. For the purchase of a car valued up to 15,000.00 PLN, the VAT correction period is 12 months. In the case of leasing assignments, this situation does not apply; therefore, there is no incurred input tax that, based on VAT regulations, could be subject to correction. These regulations apply exclusively to purchased cars, and the assignment does not affect the change in the vehicle’s use.

4. Tax Situation of the Assignor (Acquiring Receivables)

The tax situation is different for the entity acquiring receivables. In this case, the input VAT from the acquisition of receivables from the leasing agreement will be subject to deduction, based on general rules applicable to passenger cars. Accordingly, in the case of using the car exclusively for business purposes, 100% of the VAT is eligible for deduction, while in other cases, 50% of the incurred VAT can be deducted.

The net consideration value may be recognized as a deductible expense, taking into account the limits related to the car’s value. For a non-electric passenger car, the expenditure can be considered a deductible expense only in proportion to the car’s value relative to the limit, which is 150,000.00 PLN (for electric cars, 225,000.00 PLN).

Further settlements related to the acquired lease will proceed for the acquirer in a standard manner, without any specific deviations.

5. Summary

The act of leasing assignment is becoming increasingly common on the market, especially in the area of personal car transactions, where leasing is a very attractive form of financing. Leasing assignment allows a business owner to dispose of obligations before the end of the lease agreement.

However, it is essential to remember that leasing assignment will be subject to VAT according to general principles, i.e., the entire consideration value should constitute taxable sales value subject to VAT. On the other hand, for the entity acquiring receivables from the lease, the input VAT from the consideration is subject to deduction in its VAT settlement, depending on how the car is used: either 100% or 50%, for usage in both business and private purposes.

It is also important to note that, from the assignor’s perspective, there will be no possibility to correct input VAT from previous years in the case of leasing assignment. This is because, in the case of assignment, it cannot be considered a car sale, and thus, Article 90b of the VAT Act will not apply. Consequently, past settlements will remain unchanged.