Deductibility of vehicle expenses in Personal Income Tax: the requirement of exclusive use

The deductibility of expenses related to a motor vehicle is one of the main points of friction in the tax management of self-employed professionals. A recent binding ruling from the Dirección General de Tributos (DGT) clarifies the requirements necessary for these amounts to be considered deductible expenses in Personal Income Tax (IRPF).

What the DGT has ruled

The issue raised focuses on the possibility of deducting expenses derived from the acquisition and maintenance of a vehicle. After analyzing current regulations, the DGT determines that for these expenses to be included in the taxpayer's taxable base, it is essential that the vehicle is exclusively assigned to the economic activity being carried out.

The criterion is based on the application of Law 35/2006 (LIRPF), the Personal Income Tax Regulation (RIRPF RD 439/2007), and Law 27/2014 (LIS). The administration emphasizes that if the vehicle is used for both professional and private purposes, the requirement of exclusive assignment is broken, which prevents the deductibility of the associated expenses.

What this means for you

If you are a self-employed professional, this criterion implies that it is not enough to use the vehicle for trips related to your work. The regulations require a total separation between professional use and private use. If the vehicle has mixed use, the Tax Administration has the power to reject the deductibility of maintenance, fuel, or acquisition expenses, as the condition of exclusive assignment to the economic activity is not met.

What you should do

Given this situation, it is fundamental for each professional to evaluate the nature of their activity and the actual use they make of their assets. It is necessary to have documentation that supports the economic activity and the exclusivity of the vehicle's use. Since the interpretation of assignment can be complex, it is recommended to assess the particular situation of each case to avoid contingencies in future tax inspections.