Depreciating an electric car is a way to reduce business costs. Importantly, the depreciation-related limits that entrepreneurs are entitled to are attractively priced. Not sure exactly what car depreciation is? Want to know how it differs for internal combustion, hybrid and electric cars? Wondering how much VAT on electric cars can be written off? We answer all these questions.
Electric car depreciation - what does it consist of?
Depreciating a car involves entering it as a fixed asset and adding it to the cost of doing business. In other words, depreciation assumes that the vehicle is used up in such a way that, at the end of the depreciation period, its value is PLN 0. Depreciation is distinguished from another popular form of business car use, namely leasing, by the fact that the vehicle is owned.
Including the use of a car as a business expense removes the need for the entrepreneur to pay mileage to the employee. It must be included in tax returns when an employee uses their private car for professional purposes.
The depreciation of a company car increases the cost of the company's operations, allowing the entrepreneur to pay less income tax. For this reason, it is often chosen as a more favourable option than paying mileage. This method of accounting for the use of a company car is popular particularly in small businesses. Larger companies usually opt for leasing, which allows them to regularly replace their car fleet with a newer one.
The above explanation applies to all car models. The depreciation of an electric car differs from the inclusion of internal combustion and hybrid vehicles in company expenses in that it is financially more advantageous for the entrepreneur. The depreciation costs of an electric car thus enable lower taxes to be paid. 
What does the increased depreciation limit for an electric car mean?
Effective from 2019, regulations have increased the limits for vehicle depreciation. The law allows the cost of a combustion and hybrid car to be entered in the fixed asset register up to PLN 150 thousand. Depreciation of an electric passenger car is possible up to PLN 225 thousand.
Previously, the limits were almost doubled. Before 2019, the rate for internal combustion vehicles was €20k. The purchase of an electric car allowed the taxpayer to account for up to €30k.
Depreciation of an electric car - accounting rules
Depreciation of an electric car is possible in four ways. The vehicle can be charged to costs on a straight-line, accelerated or one-off basis. Depreciation of used cars is also possible. It is mainly the first two types of settlement that are significant. The reason for this is the current prices of electric cars. On the other hand, the still rather underdeveloped secondary market in Poland makes it difficult to find used electric cars in practice.
How do you depreciate a car? Types of depreciation for an electric car
In the case of accounting on a straight-line basis, entrepreneurs are subject to a 20% rate. For simplicity's sake, it can be assumed that the vehicle cost an equal amount of PLN 200,000. This price should then be divided by 0.2 and then by the number of months in a year. With such assumptions, this translates into a reduction of the tax base by PLN 3333.33 per month.
The entrepreneur can also benefit from accelerated depreciation. It has the advantage of a higher tax-free amount. In this situation, straight-line depreciation is multiplied by a coefficient of 1.4. The result must then be multiplied by 28%. Assuming that the electric car cost PLN 200,000, a monthly amount of PLN 6533.33 can be deducted. This way of depreciating the vehicle is useful when it is used on long journeys or for driving on difficult terrain.
Reducing the costs of doing business is also possible with one-off depreciation. This works well when the value of the vehicle does not exceed PLN 10,000. However, it is not compulsory. Instead of depreciation, the taxpayer may include the car in deductible costs. Due to the current prices of electric cars, this solution is purely theoretical.
It is possible that depreciation of used electric cars will be very beneficial in the future. Assuming the car cost PLN 200 000, a rate of 40% would allow a tax deduction of PLN 6666.66 per month. However, there is still a long way to go. The vast majority of electric cars used in Poland are new vehicles. 
Depreciation of an electric car and a combustion engine - comparison of the two solutions
The increased depreciation limit is a solution that supports entrepreneurs. It can be felt by all business owners. The greatest benefit is for businesses using a fleet of electric cars. In their case, the value is PLN 75 000 higher than in the case of combustion cars.
Nevertheless, much remains to be done. It will not be possible to popularise electromobility without lower prices for electric cars. However, this will still take time. The biggest obstacle is the cost of producing batteries for this type of vehicle. Before this problem is overcome, legislative action would be advisable. One of them is higher subsidies for this type of vehicle. Equally important is the deduction of VAT on the purchase of an electric car.
Electric car and VAT deduction
As with combustion cars, it is possible to reduce the expenditure on a new electric car. A 100% VAT deduction is theoretically possible. Why is this so? Just one trip in a company car for private purposes reduces the VAT deductibility to 50%.
These rules apply regardless of whether it is a combustion car or an electric car. VAT deduction is fully possible, but requires very meticulous record-keeping of journeys. This inconvenience means that many entrepreneurs choose not to do so. What is needed is a change in the rules at European Union level.
The depreciation of an electric car is currently very beneficial for businesses. However, the widespread use of electric cars in business fleets is still some way off. The political support given to the electromobility industry fortunately gives hope that things will move towards a better direction.
