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Changes in the VAT deduction in commercial vehicles

The treatment of the deduction on the Value Added Tax (VAT) paid on vehicles can be confusing in certain circumstances. In general, for business activities it is presumed that passenger cars have 50% affectation on the activity, which can be destroyed (theoretically) by means of evidence to the contrary.

Presumption of total affection

The VAT Law makes clear that in certain cases the deduction can be supposed to be 100%. This presumption is admitted in vehicles used for:

  • The provision of transport services by means of a compensation,
  • The education of drivers and pilots by means of a compensation,
  • The salesperson or representative that works as professionals,
  • The security services,
  • The ones used by its makers for the test developments or sales promotions and,
  • The vehicles used in the transport of goods.

Different tax treatments

In relation to the VAT of the vehicles used for commercial activities, what doesn’t seems to make much sense is to presume that vehicles destined for commercial activities have a 100% of affection on the activity if the person who performs them is a professional, but only 50% if we are in a business context, although this is the way that the Tax Agency has understood until a recent resolution in favor of the taxpayer by the Supreme Court (Tribunal Supremo).

Thus, with Sentence 1347/2018, the novelty that has occurred in relation to the VAT paid for vehicles used for commercial activities, is that the Supreme Court states that the presumption of 100% of the VAT quotas related to commercial activities and representation, regardless of whether they are carried out by self-employed or personal employees. Therefore, in the case of VAT paid quotas derived from vehicles used for commercial activities, the presumption of 100% affectation will be applicable, and the Administration will then have the duty of demonstrate a degree of affectation different than cited 100%.

If you are thinking of starting a business or you already have it, and you prefer that a professional consultancy be in charge of advising you in all tax and accounting issues, do no t hesitate to contact GM Tax Consultancy, we will analyze your case and we will advise to your needs.

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