After our post about “Amortization of a property” where we explained which ways we can use to amortize the items. Today we will focus on analyzing the amortization of vehicles and its expenses, its percentage and if they have to be affect or not by an economic activity.
1. How are vehicles depreciated?
As we saw in the article “Amortization of a property”, the most common way to amortize a good is by using linear amortization and the amortization tables, which establish a maximum linear percentage and a maximum amortizing period.
Kind of elements
|Max. Linear coefficient
Maximum period of years
|Locomotives, cars and traction equipment
Ships and aircraft
|Internal transport elements
External transport elements
In order to be able to consider some deductible expense it must be used and demonstrate its use in the economic activity of society and not in the private life. It is also a type of expenditure, which may be amortized according to their degree of involvement in economic activity.
2. Deduction of business vehicles
Buying a vehicle by a company is an acquisition that is considered a tangible and at the time of tax deductions usually presents some controversy over the use that is given to the vehicle, as only could benefit certain amortization based on the effect of economic activity.
2.1. 50% rebate on company cars
The fixed asset used in all or part of the development of business activities it can be deducted EXPENSES RELATING TO THEM! when you they are motor vehicles and their trailers, mopeds and motorcycles since they presume affected of the development of the profession in a proportion of 50%
2.2. 100% deduction on vehicles totally affected by business activity
However there are certain times when the vehicles can boast affected by business activity at a 100% and therefore can deduct 100% of the rate of VAT of its acquisition and maintenance costs, repairs, parking, fuel and tolls. To apply this deduction there has to be provided the necessary evidence implicating the vehicle in the intrinsic development of the activity, such as parking tickets, job reports, tracking systems of certain vehicles, etc.
You may deduct 100% in the following circumstances:
- Those used in the provision of passenger transport services.
- The crossovers.
- Those used in the provision of education of drivers or pilots.
- Those used in professional displacements by the representatives or commercial agents.
- Those used by their manufacturers when testing, trials, demonstrations or sales promotion.
- Those used in monitoring services.
We must also bear in mind that if a vehicle is used by the commercial it may also deduct 100% of VAT payments, as specified in Tax Law
2.3. Deductibility of vehicle expenses:
a. Fuel Deduction
The DGT has disassociated deduct of VAT on the purchase of the vehicle and on the fuel used during the business activity and therefore, although we deduct 50% VAT from vehicles, we can reach us to deduct up to 100% of the fuel.
b. Deduction of tolls
Toll expenses that occur during business activity must be justified and for this are not enough tickets collected at the toll station, and can manifest lack of information. To deduct the toll charges would be recommended as the use of the Toll Road, which subsequently can be ordered complete invoices.
c. Deduction of parking
In the case of the parking it happens something similar, since they are not generally accepted as a proof the blue zone tickets. What can be accepted are the requested invoices in a public or private parking.
3. Deduction of used vehicles
The depreciation of second-hand vehicles are considered as properties that have been acquired when they have been already used, and they are regulated by Royal Decree 1777/2004, of July 30, approved there the Corporation Tax Reglamente.
3.1. What can be amortized?
It can be amortized until the result of multiplying by 2 the amount derived from applying the maximum coefficient of linear depreciation, which stands at 16%. Therefore it can be amortized a 32%.
3.2. How can it be amortized?
– If the purchase price is known it will be used for calculating the maximum coefficient of linear amortization. Therefore, every year we can amortize the 16% annual maximum on the initial value of the car.
– However if we don’t know the purchase price or original cost of production an expert will determine it.
4. Tax treatment of leasing and renting a car
When a vehicle is acquired, as in previous cases, it increases the heritage and the good becomes part of the assets of the company. This does not happen when a vehicle is used by leasing or renting:
- Leasing is a rental with purchase option and therefore does not reach the good assets of the company while we don’t purchase it. On the other hand we can also find that leasing means the acquisition of vehicles by financial leasing, in which case the elements themselves would be recorded in the asset.
- Renting is a lease and bit without the purchase option, so the vehicle will never be considered an asset of the company. We must also take into account that the price of renting is usually higher since it not only includes the rental of the vehicle itself, but also the related expenses such as maintenance, insurance…
When we talk about the treatment in the Income Tax of Individuals we should know that it cannot be admitted a partial involvement, so they can not be deductible those vehicles used by leasing or renting simultaneously for private and economic activities.
4.1. tax advantage of leasing on leasing:
The lease is considered a simple expense of the business activity, not like the leasing that has a complex tax system for its involvement in the statement of the assets and liabilities of the companies. Because of this, companies can deduct up to 100% of the monthly dues of the lease in the income tax but also the VAT, which can be deducted in full when having an exclusive business use.
Nowadays Madrid and Catalonia are the communities where they are betting more for the option of renting.
If you require further information or you need any tax advise do not hesitate to contact us.