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A company asks whether it can deduct the full amount of renting payments for a motor vehicle and its VAT. The DGT responds that the expense is deductible in corporate tax if its use in the business activity is justified and accounting requirements are met, while VAT deduction depends on actual classification, assuming a 50% rate for motor vehicles.
Question posed: Whether, under the stated assumptions, the consulting entity could deduct the total amount of the monthly installments for Corporate Income Tax purposes and the VAT incurred therein.
For Corporate Income Tax, renting is deductible if the vehicle is used in the business activity, is recorded in the accounting books, is imputed on an accrual basis, and is supported by documentation. Regarding VAT, after proving its use for business purposes, passenger cars have a presumption of business use of 50%, although a different degree may be proven. The VAT deduction also depends on whether the transfer to the employee is onerous or free of charge.
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