If you have a company or you are a self-employed worker and you are going to buy a car, it is very likely that you have had the doubt of whether or not you can deduct the VAT from the company car in order to save you an economic amount to take into account.
The reality is that if you buy a company car, you can effectively deduct VAT,but for this it is essential that you meet a series of essential requirements. Especially now that the deductibility of VAT on business vehicles has focused the focus of inspections by the State Tax Administration Agency (AEAT).
Aware that the deductibility of VAT on company cars is an issue that generates a lot of controversy, from AYCE Laborytax we want to give you all the information about it, as well as indicate what are the requirements that you must meet if you want to deduct the VAT of the professionalcar.
Who is in a position to deduct VAT from a company car?
All those professional persons or companies regulated in article 5 of Law 37/1992 on VAT, will be in a position to deduct VAT from their business vehicles,provided that they directly affect their business or professional activities:
- Natural and legal persons who carry out a business or professional activity.
- Builders, developers and developers.
“Those entrepreneurs or professionals who purchase a vehicle that will not directly affect their business or professional activity will not be able to deduct the vat payments borne or paid.”
In the event of inspection or verification by the Tax Agency, it must be justified that it is indeed a vehicle intended for business or professional activity. This issue can be complicated, given that the tax agency’s own interpretation comes into play.
It is mandatory that the VAT amounts to be deducted have accrued in Spain, as well as that they do not exceed the amounts established according to the VAT Law.
When can 100% of the VAT be deducted from a business vehicle?
In those vehicles that are “directly and exclusively affected by the professional activity”, 100% of the VAT may be deducted after their acquisition. In addition, in the case of vehicles that will be used exclusively professionally, 100% of the VAT may also be deducted from those expenses caused by their use:gasoline, tolls, repairs, ITV, accessories and spare parts, parking expenses, etc.
If you are in a position to prove that it is a vehicle whose use is exclusive for work, you can deduct 100% of vat and personal income tax. It will be considered as an investment.
In these cases, you should keep in mind that all the deductible expenses must be justified by their corresponding invoice,as well as that all costs must be recorded in the Books Records of Purchases and Expenses for personal income tax purposes, and in the Book of Invoices Received for the purposes of input VAT.
Which vehicles will be able to deduct 100% of the VAT?
- Mixed vehicles intended for the carriage of goods or the provision of passenger transport services. (Taxis)
- Vehicles intended for driver training. (Driving school cars)
- Vehicles intended for testing, testing, demonstrations or sales promotions.
- Vehicles intended for the professional movement of representatives, commercial agents or surveillance services.
Can VAT be deducted from a company car with private use?
In case you are a professional person or have a company, and you are going to acquire a car to use both in your professional activity and in a private way, you can deduct 50% of the VAT of the vehicle. If on the other hand you are not going to use the car at all during your professional activity, you will not be able to deduct any vat percentage.
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This type of vehicle will be considered as “not directly and exclusively affected by professional activity”,since they will be used simultaneously for professional and private activities.
In the case of vehicles not directly and exclusively related to professional activity, the deductible percentage of input VAT on certain vehicle-related expenses will be only 50%.
Tips to accredit the exclusive use of the vehicle for professional activity
In order not to suffer any problem with the AEAT regarding the deduction of VAT from a company car, there are some means that will allow you to prove that the car is used solely and exclusively for the performance of the work activity:
- Label the car with the colors and name of the company.
- Gather parts of work.
- Justify all the displacements made.
- Sign a company parking contract with 24-hour surveillance.
- Have another exclusive vehicle for domestic use.
Whether you have a company or if you are a self-employed worker, and you buy a car to carry out your work activity, you can deduct a significant percentage of VAT. In case it is an exclusive car for work use, you can deduct 100% of the VAT of the vehicle, while if you combine professional use with private use, you can only deduct 50% of vat.
The tax advisors of AYCE Laborytax,in case of doubt, recommend deducting only 50% of the input VAT,thus avoiding any problem or sanction by the Tax Agency.