Nowadays, companies are trying to motivate and retain their workers by offering extra complements additionally to their salary. This fact is known as a payment in kind and it includes from food tickets or shares of a company to health insurance or a company’s car. Today we would like to pay attention to the last one because depending on why we use it, we will have to include it in the income or not. Before focusing on how a car of a company pays taxes, we would like to encourage you to know how a vehicle is paid off and which are its respective deductions.
When does a vehicle have to be included in the annual tax return?
The vehicle of the company must be included in your annual tax return as an income if it is used for personal needs. However, if the vehicle is only used for work, it won’t have to be included.
How does it have to be included in the income?
The company’s car, because of the fact that is considered an income received from the employer, should be included in the Income Tax Form (IRPF Form) in the squares with the numbers 0003, 0004, and 0006. It has to be filed in the place of the Form related to employees’ incomes perceived during the year.
What is the amount that we have to include?
The most common question is to know what amount related to the car’s company has to be added to the annual tax return. The general fact is that the company you work for, which is paying this income in kind, includes this income in your payslip and also includes a prepayment of tax (a type of withholding tax). This prepayment tax could be charged to you (you have to pay it) or not (your employer pays it). In order to know it, you only have to differentiate if the car is in the employer’s name or not:
- If the vehicle is owned by the employer, you have to calculate the 20% of the acquisition cost.
- If the vehicle is not owned by the employer (because the employer pays a leasing or a renting agreement) then the income is 20% of the market value.
Once it is calculated, the quantity will have to be prorated for the period of time that the vehicle has been used freely for personal use. The problem is to calculate the time that the vehicle is used for particular matters because the criteria of the Spanish Tax authorities are quite restrictive in this sense (they consider that this time is the faculty to use the vehicle and not the effective use you do, even though, the Courts have changed these criteria).
Reductions that affect the income if the vehicle respects the environment
From the resulting quantity of the previous calculation you can reduce by a 30% if the car is considered to be energetic (electric battery vehicle (BEV); E-REV or PHEV (hybrid) with an autonomy of 15 Km as a minimum and it is not valued for more than 40.000 Euro. However, if its emissions don’t exceed 12g/km and it is not valued at more than 25.000 Euro, the reduction applied will be 15%. Otherwise, if the vehicle is valued at more than 35.000 Euros, the reduction will be 20%.
¿How to pay taxes in the case that the car has been sold to you?
Another option would be that the company had sold you the car. In this case, if your employer asks you for a car price, then we wouldn’t talk about an income in kind; otherwise, it would be a trade in which the Tax Patrimonial Transmissions or VAT must be paid.
If you need tax advice in order to calculate the company’s car tax and include it in the income, we would like to encourage you to our tax advisors in Barcelona. If you prefer, we also can take care of the IRPF declaration in your name, in a professional and closer way so that you don’t waste time nor some important data is left.