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An automotive advertising company asks whether VAT on fuel, repairs, insurance and fees for its vehicles is deductible. The DGT responds that maintenance and fuel costs are deductible based on their application to business activity, while insurance and fees are not deductible as they do not bear VAT.
Question posed: The issue raised concerns the deductibility for Value Added Tax purposes of the amounts incurred for vehicle refueling and vehicles undergoing testing, as well as repairs and maintenance, insurance, fees, and taxes.
The right to deduct VAT on fuel, repairs, or maintenance is independent of the use of the vehicle itself and depends on whether such goods and services are used for the development of professional activity. In the case of passenger cars, a 50% use is presumed unless proven otherwise. Insurance premiums are exempt from VAT and fees or taxes are not subject to the tax, therefore there is no input tax to deduct.
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