Deduction of passenger car expenses in Personal Income Tax: the requirement of exclusive use

The Dirección General de Tributos (DGT) has clarified the tax treatment of expenses derived from the use of passenger vehicles for self-employed professionals. The central issue revolves around the possibility of deducting concepts such as gasoline or parking in Personal Income Tax (IRPF).

What the DGT has resolved

The body has determined that, for passenger vehicle expenses to be deductible, the vehicle must constitute an asset exclusively assigned to the economic activity. Since this is not one of the activities excepted by the regulations, if the vehicle is also used to satisfy private needs, it loses its status as an assigned asset.

Consequently, if mixed use exists, it is not possible to apply the deduction for any expense related to the vehicle. The resolution emphasizes that exclusive assignment is not presumed, but must be proven through evidence admitted by law.

What this means for you

If you are a self-employed professional and you use a passenger vehicle to travel to your clients or carry out business matters, but you also use it for your daily life, the Tax Administration considers that there is no exclusive assignment. This implies that:

• You will not be able to deduct fuel, parking, or other operating costs in your IRPF tax return.
• The burden of proof lies with the taxpayer, who must demonstrate that the vehicle has no personal use.
• Failure to meet this exclusivity requirement invalidates the deductibility of the expenses associated with the vehicle.

What you should do

Given this situation, it is necessary to assess the nature of the vehicle's use. If the activity requires the use of a car, the possibility of reliably proving that the asset is intended solely for professional purposes must be considered. It is fundamental to analyze the available documentation to support the assignment and evaluate the convenience of keeping these types of assets in the economic activity's accounting.