Deduction of passenger car expenses: the requirement of exclusive use

The Directorate General of Taxes (DGT) has issued a relevant ruling for self-employed professionals seeking to deduct expenses derived from the acquisition and maintenance of passenger cars in their Personal Income Tax (IRPF) declaration.

What the DGT has ruled

The query concerned the possibility of deducting acquisition, maintenance, repairs, fuel, and other costs associated with a passenger car in the IRPF. The DGT has determined that the deduction of these expenses requires the vehicle to be an asset assigned exclusively to the economic activity.

As this is not one of the activities excepted by the Regulations, the law requires that the vehicle be used exclusively for professional purposes. A key point of the resolution is that owning another vehicle for private use does not serve as proof to certify that the professional vehicle is used solely for the economic activity.

What this means for you

If you are a self-employed professional, this criterion limits the ability to deduct expenses for passenger-type vehicles. For the Administration to accept the deduction of these costs, it is not enough for the vehicle to be used for work; there must be an exclusive assignment to the activity.

The existence of a personal vehicle does not guarantee that the vehicle linked to the activity will be considered professional for tax purposes. If the vehicle has mixed use, the deduction of its expenses could be compromised during an inspection, given that the regulations require exclusivity in use to allow the deductibility of maintenance and acquisition expenses.

What you should do

It is essential for professionals to evaluate the nature of the use they make of their vehicles. Given the requirement of exclusive assignment, it is necessary to:

• Verify if the vehicle meets the requirements for strictly professional use.
• Consider the documentation that supports the economic activity linked to the vehicle.
• Assess each particular situation to determine the viability of deducting fuel, repair, and other associated costs.