Company car subsidies allow companies in Poland to provide cars for work-related and optionally private purposes as a non-cash benefit (in-kind benefit). These cars are provided by the employer through leasing or as a company asset. As an in-kind benefit, these company cars are subjected to lower tax rates. These rates are calculated as a monthly lump sum based on the power of the car’s engine and are also dependent on how the car is used so that there is a higher subsidy on cars used for more private purposes. Cars with less than 60KW engine power and electric and hydrogen vehicles have an in-kind benefit of EUR 55 per month, and more powerful cars are EUR 88 per month. This subsidy primarily benefits the car industry, companies and employees, especially senior employees, who receive a company car for private use. Other countries with similar company car subsidies include Belgium, Denmark, Germany and Austria.
There is no estimate of the budget impact of this subsidy because of the complexity of calculating it. However, the budget impact should be substantial because 80% or more of the company cars are not taxed, the number of company cars is increasing and middle- to high-income earners mainly receive this in-kind benefit.
This subsidy makes company cars cheaper and reduces the incentive for consumers to use fuel efficiently. The environmental impacts of company car subsidies include higher fuel use and emissions and impacts related to car production and resource use. Approximately 25% of all cars in Poland are company cars. While there are no exact estimates of the fuel use of company cars compared to other cars, the emission factor of company cars is 4-6% higher than other cars. If the subsidy were removed, this would amount to a reduction of 580 to 870 thousand tons of CO2 each year. Company cars are often sold after 3 years and tend to be heavier and more expensive than other cars.
This subsidy was recently reformed to tax lower emission company cars less. However, the difference between tax rates for lower emission cars and higher emission cars is minimal. This reform was criticised, and further tax reform is likely to occur in the next 6 months. Company car subsidies may or may not be included in this upcoming tax reform. To reduce the environmental impact of company car subsidies, future reforms should incentivise the use of low- or zero-emission vehicles and remove subsidies for high-emission cars. A successful reform should happen gradually and include increasing the flat-rate tax for high-emission cars, subsidizing only low – or zero-emission cars, limiting variable costs of subsidies to discourage the use of cars and subsidizing other transportation methods.
More information on company car subsidies and other candidates for reform in Poland and other Member States can be found in the country case studies and factsheets compilation.