Companies cannot deduct 100% of VAT if they provide vehicles to employees free of charge

There is a common confusion in corporate fleet management regarding the deductibility of Value Added Tax (IVA) when vehicles are assigned to workers. The nature of benefit-in-kind for IRPF does not always coincide with the nature of the transaction for IVA.

What the DGT has ruled

The Dirección General de Tributos (DGT) has analyzed whether the fact that a worker receives a benefit-in-kind for the use of a vehicle allows the company to deduct the entirety of the IVA incurred in its acquisition. The ruling establishes that the imputation of said benefit-in-kind for IRPF does not, by itself, determine that the provision is an onerous transaction for IVA purposes.

For the company to apply a 100% deduction, the provision must be onerous. This requires that the worker:

• Makes an actual payment for the use of the vehicle.
• Deducts a portion of their salary to cover said cost.
• Chooses between different remuneration benefits, renouncing one to obtain the vehicle.

If the provision is made free of charge, without the worker making a payment or renouncing part of their remuneration, the application of the 50% presumption of use for passenger vehicles remains, in accordance with Law 37/1992.

What this means for you

If your company assigns vehicles to employees without them receiving direct economic consideration or an explicit salary reduction, it will not be able to deduct 100% of the IVA from the purchase. IVA regulations are strict regarding the onerousness of the transaction and are not validated solely by the calculation of the benefit-in-kind performed for Personal Income Tax (IRPF).

What should be done

It is necessary to review employment contracts and remuneration policies to verify how the vehicle provision is structured. To claim the full deduction, the transaction must meet the onerousness requirements demanded by IVA regulations, clearly differentiating the tax treatment in IRPF from the treatment in Value Added Tax.