Poland: VAT refund on N1 and M1 vehicles limited without mileage log

What are N1 and M1 vehicles?

When reclaiming VAT in Poland, it is important to know which type of vehicle was used to incur the costs. Poland makes a clear distinction between heavy transport and lighter vehicles.

M1 vehicles are passenger cars with a maximum of eight seats excluding the driver. N1 vehicles are goods vehicles with a maximum permissible mass of no more than 3.5 tonnes, such as vans. Both categories are subject to a specific Polish VAT rule that regularly catches foreign transport companies off guard.

The Polish 50% rule

Poland applies a statutory restriction on VAT deduction for N1 and M1 vehicles. As a general rule, VAT on costs incurred with these vehicles is only 50% reclaimable. This applies to all related expenses, such as fuel, repairs and other vehicle-related costs.

The rationale behind this rule is that N1 and M1 vehicles are used in practice for both business and private purposes. Poland treats mixed use as the default and therefore automatically applies a 50% restriction, unless the contrary can be demonstrated.

The EU Council has authorised Poland to apply this measure and has extended that authorisation until the end of 2028.

This 50% restriction applies not only to Polish VAT taxpayers, but also to foreign companies reclaiming VAT through the 8th Directive or the 13th Directive. Poland applies the same deductibility rules when assessing foreign refund applications.

100% refund is possible, but requires documentation

It is possible to reclaim the full VAT, but this requires demonstrating that the vehicle is used exclusively for business purposes. Poland requires two conditions to be met simultaneously:

• A complete mileage log recording for each trip the date, departure and destination, purpose of the trip and odometer reading
• An internal policy specifying who may use the vehicle and under what conditions

For foreign companies reclaiming VAT through the 8th Directive, the mileage log in particular is the document that the Polish tax authority may request upon review. If it cannot be provided, the refund will be reduced to 50% of the VAT amount submitted.

What does this mean for your refund file?

For transport companies incurring costs in Poland with vans or passenger cars, for example for service technicians, sales representatives or other employees driving an N1 or M1 vehicle, it is important to maintain the mileage log consistently.

If no mileage log is kept and the Polish tax authority requests one when assessing your refund application, the refund will automatically be limited to 50% of the submitted VAT amount. For larger fleets or high fuel costs, this can amount to a significant sum.

Let professionals guide you

Delta Refund Solutions is familiar with Polish VAT rules for N1 and M1 vehicles and advises you on the correct documentation to secure the full refund. We review your file before submission and flag any missing information in good time.

Feel free to contact us, we are happy to help.