B Law & Tax
23 August 2023

Tax Advisor: Tax Agency approves controls on mixed use of vehicles in companies

The Tax Agency (AEAT) will henceforth adjust its approach to the transfer of vehicles to employees by companies, increasing the requirements for proof of their professional and personal use. This modification responds to recent decisions of the CJEU, the Audiencia Nacional and the TEAC, which establish that the company must demonstrate the necessity of the vehicle for work and its exclusion of personal purposes. In cases of personal use, the AEAT will apply the criterion of availability for private purposes, both for VAT and personal income tax purposes, following the definition of the Audiencia Nacional.

However, for employees and executives, the hours stipulated in the collective bargaining agreement and the availability time, which includes weekends, holidays, vacations, and off-hours on working days, will be followed.

This new approach overcomes the presumption of Article 95.Tres.2ª of the VAT Law and the common practice of some companies limiting availability to weekends.

The onus is on the company to provide evidence, and the AEAT will consider the collective bargaining agreement, exceptions for certain categories of employees and those exceeding the agreed schedule, as well as personnel without a fixed location or with constant travel. These particularities must be demonstrated on a case-by-case basis.

In the case of the assignment of vehicles to employees, it is considered an onerous assignment when the employee contributes economically or the cost is deducted from his salary when opting for the use of the vehicle among remuneration options. Although for personal income tax purposes this assignment is considered as compensation in kind, this does not automatically imply that it is an onerous assignment for VAT purposes.

In relation to the deduction of VAT, the AEAT distinguishes whether the assignment to employees does not imply a cost, in which case the assignment of the vehicle to the economic activity will be partial, allowing the deduction of 50% of the VAT paid on the purchase of the vehicle.

In situations of onerous assignment, the vehicle will be destined both to economic activities and to the assignment. Therefore, 100% of the VAT paid for the purchase of the vehicle may be deducted.

If after the deduction of VAT on the purchase of the vehicle, it is assigned to employees at no cost, this operation will be considered like the provision of services. In cases of onerousness and charging VAT on the assignment, the amount will coincide with the market value of the assignment. In situations where there is no comparable provision of services, it will be equal to the total costs assumed by the company.

In relation to IRPF, the calculation of the income on account will be based on 20% of the annual acquisition value for the payer, incorporating the taxes related to the transaction if the vehicle is owned by the payer. In the case of non-ownership, the annual 20% will be applied on the market value of the new vehicle. In the case of energy efficient vehicles, this percentage may be reduced to a maximum of 30%.

B Law & Tax International Tax & Legal Advisors.

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