The Spanish Tax Agency is sending out mass letters to companies warning them that it is aware of their misuse of company cars. The letters inform the companies that it has information about the vehicles they own and those they have under leasing or rental agreements, and include a list of these vehicles.
We would like to inform you that the State Tax Administration Agency (AEAT) is sending a mass mailing to companies, notifying them that it has information on vehicles owned by them and those they have under a leasing contract , and warning that it has started an information campaign regarding the tax consequences of transferring the use of vehicles to employees for their personal use.
Specifically, the letters focus on the tax consequences of providing employees with the use of vehicles for their personal use, that is, the in-kind remuneration in the Personal Income Tax without declaring it, but the actions of the AEAT regarding company cars also target expenses in VAT and Corporate Income Tax.
The letters point directly to high-end vehicles, common in both large companies and SMEs, and which the Tax Office focuses on due to their higher value and, unlike others, especially those labeled with the company logo, due to the presumption of their regular use in the worker's private life.
Individual taxpayers (both those subject to personal income tax and entities with attributed income not subject to corporate income tax) are typically the most disadvantaged when it comes to deducting business expenses for a vehicle used in their business. Firstly, deducting any expenses related to the vehicle requires that it be considered an asset used in the taxpayer's business activities.
We can find two types of vehicles:
Safe Vehicles
- Mixed vehicles intended for the transport of goods.
- Those intended for the provision of passenger transport services for a fee.
- Those intended for the provision of driver or pilot training services for a fee.
- Those intended for the professional travel of representatives or commercial agents.
- Those intended to be subject to transfer of use on a regular and onerous basis.
In these cases, the vehicle is presumed to be entirely dedicated to business activity, and its deduction as an expense through depreciation and other related costs (gasoline, repairs, insurance, municipal taxes, etc.) is generally straightforward. However, it's important to note that this is a specific list limited to certain activities or vehicle characteristics. For example, any professional who is not a sales agent or representative cannot deduct the vehicle's expenses, even if they perform similar tasks. Similarly, if the vehicle is not classified as exclusively for transporting goods, it also cannot qualify for this exception.
The rest of the vehicles
According to this precept, the remaining vehicles, since the activity will no longer be among the exceptions contemplated above, are required by the Tax Administration to be used exclusively for the activity.
If the vehicle is used exclusively for business purposes, both the vehicle's depreciation and expenses related to its use (repairs, fuel, insurance, etc.) can be deducted when calculating the net income from the business. However, if the vehicle is not used exclusively for business purposes, meaning it is also used for other purposes, it will not be considered as being used for business purposes, and neither the depreciation nor the aforementioned expenses related to its use can be deducted when calculating the net income.
VAT deduction
VAT rules differ from those for personal income tax (IRPF). VAT allows for a 50% deduction of input VAT. This leads to the paradoxical situation where an expense may not be tax-deductible for personal income tax purposes, but 50% of the VAT paid may be deductible.
It should be noted that if the vehicle is also used personally by any employee, administrator, etc., it will generate a benefit in kind to be included in their payroll.
In summary, depending on the type of vehicle, the activity carried out, the tax in question and the type of taxpayer, we may be able to deduct all, part or nothing.
You can contact this professional office for any questions or clarifications you may have.
Warm regards,
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A Àmbit Assessor, SL has 40 years dedicated to the tax, comptable and labor consultancy of the Pime.
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