{"id":693,"date":"2016-10-07T18:41:51","date_gmt":"2016-10-07T18:41:51","guid":{"rendered":"http:\/\/www.gmtaxconsultancy.com\/?p=693"},"modified":"2024-10-07T10:16:41","modified_gmt":"2024-10-07T10:16:41","slug":"vehicles-depreciation-amortization-economic-activity","status":"publish","type":"post","link":"https:\/\/gmtaxconsultancy.com\/en\/tax\/vehicles-depreciation-amortization-economic-activity\/","title":{"rendered":"Vehicles depreciation. Amortization when are affected with aconomyc activity"},"content":{"rendered":"<p>After our post about &#8220;Amortization of a property&#8221; where we\u00a0explained which\u00a0ways we can use to amortize the items. Today we will focus on analyzing the amortization of vehicles and its expenses, its percentage and if\u00a0they have to be affect or not by an economic activity.<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 ez-toc-wrap-left counter-hierarchy ez-toc-counter ez-toc-white ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">\u00cdndice contenidos<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/gmtaxconsultancy.com\/en\/tax\/vehicles-depreciation-amortization-economic-activity\/#How_are_vehicles_depreciated\" >How are vehicles depreciated?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/gmtaxconsultancy.com\/en\/tax\/vehicles-depreciation-amortization-economic-activity\/#Deduction_of_business_vehicles\" >Deduction of business vehicles<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/gmtaxconsultancy.com\/en\/tax\/vehicles-depreciation-amortization-economic-activity\/#50_rebate_on_company_cars\" >50% rebate on company cars<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/gmtaxconsultancy.com\/en\/tax\/vehicles-depreciation-amortization-economic-activity\/#100_deduction_for_vehicles_fully_allocated_to_business_activity\" >100% deduction for vehicles fully allocated to business activity<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/gmtaxconsultancy.com\/en\/tax\/vehicles-depreciation-amortization-economic-activity\/#Deduction_of_vehicle-related_expenses\" >Deduction of vehicle-related expenses<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/gmtaxconsultancy.com\/en\/tax\/vehicles-depreciation-amortization-economic-activity\/#Fuel_deduction\" >Fuel deduction<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/gmtaxconsultancy.com\/en\/tax\/vehicles-depreciation-amortization-economic-activity\/#Toll_deduction\" >Toll deduction<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/gmtaxconsultancy.com\/en\/tax\/vehicles-depreciation-amortization-economic-activity\/#Parking_deduction\" >Parking deduction<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/gmtaxconsultancy.com\/en\/tax\/vehicles-depreciation-amortization-economic-activity\/#Deduction_of_used_vehicles\" >Deduction of used vehicles<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/gmtaxconsultancy.com\/en\/tax\/vehicles-depreciation-amortization-economic-activity\/#What_can_be_depreciated\" >What can be depreciated?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/gmtaxconsultancy.com\/en\/tax\/vehicles-depreciation-amortization-economic-activity\/#How_can_depreciation_be_applied\" >How can depreciation be applied?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/gmtaxconsultancy.com\/en\/tax\/vehicles-depreciation-amortization-economic-activity\/#Tax_treatment_of_vehicle_leasing_and_renting\" >Tax treatment of vehicle leasing and renting<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/gmtaxconsultancy.com\/en\/tax\/vehicles-depreciation-amortization-economic-activity\/#Fiscal_advantage_of_renting_over_financial_leasing\" >Fiscal advantage of renting over financial leasing<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"How_are_vehicles_depreciated\"><\/span>How are vehicles depreciated?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>As we saw in the article \u201c<a href=\"https:\/\/gmtaxconsultancy.com\/en\/tax\/amortize-property-amortization-tables\/\">Amortization of a property<\/a>\u201d, the most common way to amortize a good is by using linear amortization and<a href=\"https:\/\/gmtaxconsultancy.com\/wp-content\/uploads\/2016\/09\/english-Actualizacio\u0301n-Tablas-de-Amortizacio\u0301n-2015.2.pdf\"> the amortization tables<\/a>, which establish a maximum linear percentage and a maximum amortizing period.<\/p>\n<table width=\"414\">\n<tbody>\n<tr>\n<td colspan=\"3\" width=\"414\">\n<p style=\"text-align: center;\"><strong>Transport elements<\/strong><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td width=\"241\">\n<p style=\"text-align: center;\"><strong>Kind of elements<\/strong><\/p>\n<\/td>\n<td style=\"text-align: center;\" width=\"77\"><strong>Max. Linear coefficient<\/strong><\/td>\n<td width=\"96\">\n<p style=\"text-align: center;\"><strong>Maximum period of years<\/strong><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td width=\"241\">Locomotives, cars and traction equipment<\/td>\n<td width=\"77\">\n<p style=\"text-align: center;\">8%<\/p>\n<\/td>\n<td width=\"96\">\n<p style=\"text-align: center;\">25<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td width=\"241\">\n<p style=\"text-align: left;\">Ships and aircraft<\/p>\n<\/td>\n<td style=\"text-align: center;\" width=\"77\">10%<\/td>\n<td width=\"96\">\n<p style=\"text-align: center;\">20<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td width=\"241\">Internal transport elements<\/td>\n<td width=\"77\">\n<p style=\"text-align: center;\">10%<\/p>\n<\/td>\n<td width=\"96\">\n<p style=\"text-align: center;\">20<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td width=\"241\">\n<p style=\"text-align: left;\">External transport elements<\/p>\n<\/td>\n<td style=\"text-align: center;\" width=\"77\">16%<\/td>\n<td width=\"96\">\n<p style=\"text-align: center;\">14<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td width=\"241\">Lorries<\/td>\n<td width=\"77\">\n<p style=\"text-align: center;\">20%<\/p>\n<\/td>\n<td width=\"96\">\n<p style=\"text-align: center;\">10<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<p>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.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Deduction_of_business_vehicles\"><\/span>Deduction of business vehicles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>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 <strong>benefit certain amortization based on the effect of economic activity.<\/strong><\/p>\n<h3><span class=\"ez-toc-section\" id=\"50_rebate_on_company_cars\"><\/span>50% rebate on company cars<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In the case of vehicles partially allocated to business activities, the VAT on expenses related to the vehicle, such as fuel, repairs, and maintenance, will be 50% deductible, as it is presumed that the vehicle is used 50% for business purposes and 50% for personal purposes (Binding Consultation V1930-05).<\/p>\n<h3><span class=\"ez-toc-section\" id=\"100_deduction_for_vehicles_fully_allocated_to_business_activity\"><\/span><strong>100% deduction for vehicles fully allocated to business activity<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>However, there are certain cases in which vehicles can be presumed to be entirely allocated to business activity, allowing a 100% deduction of the VAT on their acquisition and expenses related to maintenance, repairs, parking, fuel, and tolls. To apply this deduction, the necessary evidence must be provided to prove that the vehicle is intrinsically involved in the business activity, such as parking tickets, work reports, tracking systems for certain vehicles, etc.<br \/>\nThe 100% deduction can be applied in the following circumstances:<\/p>\n<ul>\n<li>Vehicles used for the provision of passenger transport services for consideration.<\/li>\n<li>Vehicles used for the provision of driver or pilot training services for consideration.<\/li>\n<li>Vehicles used for professional travel by representatives or sales agents.<\/li>\n<li>Vehicles used by manufacturers for testing, trials, demonstrations, or sales promotion.<\/li>\n<li>Vehicles used in surveillance services.<\/li>\n<\/ul>\n<p>We should also note that if a vehicle is used by the company\u2019s sales representative, the VAT can also be deducted at 100%, as specified in Law 37\/1992.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Deduction_of_vehicle-related_expenses\"><\/span><strong>Deduction of vehicle-related expenses<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Expenses related to vehicle use, as mentioned earlier, can also be deducted, provided they can be demonstrated and their exclusive allocation to the business activity is proven. The most important are the following:<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Fuel_deduction\"><\/span><strong>Fuel deduction<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>The DGT (Directorate-General for Taxation) has decoupled the VAT deduction on the acquisition of the vehicle from the deduction on fuel used for business activity. Therefore, even if only 50% of the VAT on the vehicle is deducted, up to 100% of the fuel costs can be deducted.<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Toll_deduction\"><\/span><strong>Toll deduction<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>Toll expenses incurred during business activities must be justified, and toll tickets collected at the toll station may be insufficient as they often lack adequate information. To deduct toll expenses, it is advisable to use the V\u00eda-T toll system, as full invoices can be requested later.<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Parking_deduction\"><\/span><strong>Parking deduction<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>A similar issue arises with parking, as blue zone tickets are usually not accepted as proof. However, invoices from public or private parking facilities may be considered valid evidence.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Deduction_of_used_vehicles\"><\/span><strong>Deduction of used vehicles<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The depreciation of second-hand vehicles, considered as tangible fixed assets acquired in a used condition, is regulated by Royal Decree 1777\/2004, of 30 July, which approves the Corporate Tax Regulations.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_can_be_depreciated\"><\/span><strong>What can be depreciated?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Depreciation is allowed up to twice the amount derived from applying the maximum straight-line depreciation rate, which is set at 16%, as indicated in the depreciation tables. Therefore, depreciation of up to 32% is permitted.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"How_can_depreciation_be_applied\"><\/span><strong>How can depreciation be applied?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>If the acquisition price is known, it is used to calculate the maximum straight-line depreciation rate. Each year, up to 16% of the car\u2019s initial value can be depreciated.<br \/>\nIf the acquisition price or original production cost is not known, it should be determined by an expert.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Tax_treatment_of_vehicle_leasing_and_renting\"><\/span><strong>Tax treatment of vehicle leasing and renting<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>When a vehicle is purchased, as in the previous cases, the company\u2019s assets increase because the vehicle becomes part of the company&#8217;s fixed assets. This does not happen when a vehicle is used through leasing or renting:<\/p>\n<ul>\n<li><strong>Leasing<\/strong>: This is a rental agreement with an option to purchase, so the asset does not form part of the company&#8217;s fixed assets until the purchase option is exercised. However, vehicles acquired under financial leasing arrangements would be recorded as assets.<\/li>\n<li><strong>Renting<\/strong>: This is a rental agreement with no purchase option, meaning the vehicle will never be considered a company asset. It should also be noted that the cost of renting is generally higher as it includes not only the rental of the vehicle but also related expenses such as maintenance, repairs, insurance, etc.<\/li>\n<\/ul>\n<p>In terms of the treatment under Personal Income Tax, partial allocation is not permitted. That is, vehicles used for both private and business purposes under leasing or renting agreements cannot be deducted.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Fiscal_advantage_of_renting_over_financial_leasing\"><\/span><strong>Fiscal advantage of renting over financial leasing<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Renting is considered a straightforward business expense, unlike leasing, which has a more complex fiscal impact due to its effect on the balance sheet\u2019s assets and liabilities. For this reason, companies can deduct up to 100% of their monthly renting payments in Corporate Tax, as well as the VAT, provided the vehicle is used exclusively for business purposes.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>After our post about &#8220;Amortization of a property&#8221; where we\u00a0explained which\u00a0ways we can use to amortize the items. Today we will focus on analyzing the amortization of vehicles and its expenses, its percentage and if\u00a0they have to be affect or not by an economic activity. How are vehicles depreciated? As we saw in the article [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":697,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[52],"tags":[256,252,254],"class_list":["post-693","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tax","tag-amortize","tag-depreciation","tag-vehicle-amortization"],"_links":{"self":[{"href":"https:\/\/gmtaxconsultancy.com\/en\/wp-json\/wp\/v2\/posts\/693","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gmtaxconsultancy.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gmtaxconsultancy.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gmtaxconsultancy.com\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/gmtaxconsultancy.com\/en\/wp-json\/wp\/v2\/comments?post=693"}],"version-history":[{"count":4,"href":"https:\/\/gmtaxconsultancy.com\/en\/wp-json\/wp\/v2\/posts\/693\/revisions"}],"predecessor-version":[{"id":18206,"href":"https:\/\/gmtaxconsultancy.com\/en\/wp-json\/wp\/v2\/posts\/693\/revisions\/18206"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/gmtaxconsultancy.com\/en\/wp-json\/wp\/v2\/media\/697"}],"wp:attachment":[{"href":"https:\/\/gmtaxconsultancy.com\/en\/wp-json\/wp\/v2\/media?parent=693"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gmtaxconsultancy.com\/en\/wp-json\/wp\/v2\/categories?post=693"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gmtaxconsultancy.com\/en\/wp-json\/wp\/v2\/tags?post=693"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}