Recent VAT-related changes
have affected the Polish leasing market.
A court ruling in December
2010 on lessors offering insurance bundled with leasing is causing
a major headache to tax advisers.
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The court sentence provided an
interpretation suggesting that insurance, when sold by a leasing
company, should be taxed at normal VAT rate of 22%. Prior to that,
the common understanding for Polish lessors was that the insurance
component should have not carried VAT.
Although the issue is still being
discussed, if the ruling is confirmed it could hit a number of
lessors, which might have to pay back large amounts on VAT. This
could impact on profitability.
The Polish tax system was described
by one commentator as complex, opaque, and variable from region to
region; and as open to interpretation about what the tax rules say
and how to apply them.
On the upside, another VAT change
at the end of 2010 has provided lessors with a huge increase in car
leasing business.
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By GlobalDataThe boom followed the withdrawal on
31 December 2010 of a favourable VAT treatment for certain
passenger cars, which had been designed to favour car sales during
the economic crisis. If companies registered passenger cars as
transportation vehicles by 31 December, they would be given a full
VAT deduction.
The withdrawal of the benefit
generated a rush from firms.
Pekao Leasing CEO Irene
Grzybowski says: “It was a popular tax benefit that everyone was
keen to take advantage of, because it was so favourable. It had a
huge impact on our new business production in the last
quarter.”
In December last year alone, the
company won the amount of business it normally budgets for one
quarter.
“The flipside is that the demand
for passenger vehicles should drop in 2011,” Grzybowski adds.
Millennium Leasing and SGEF have experienced a similar trend.
Millennium Leasing chairman Wojciech Rybak said that the peak in
the fourth quarter of 2010 will probably mean that the car leasing
sector could be flat in 2011, or even slightly down in the first
quarter of this year.
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