Deduction of passenger car expenses: the requirement of exclusive use

The deductibility of expenses derived from a passenger car in Personal Income Tax (IRPF) is a point of constant attention for self-employed professionals. A recent binding ruling from the Dirección General de Tributos (DGT) has clarified the strict conditions that must be met for these costs to be admitted as deductible expenses.

What the DGT has ruled

The DGT has determined that, for passenger car expenses to be deductible, the vehicle must constitute an asset exclusively assigned to the economic activity. This implies two fundamental requirements:

• Accounting registration: The vehicle must be duly registered in the activity's accounting records.
• Exclusive use: The vehicle must be used solely for professional purposes.

The criteria emphasize that passenger-type vehicles do not benefit from the exception of accessory use for private purposes. Therefore, if the vehicle has mixed use, the administration considers that it is not assigned to the activity and, consequently, no related expenses can be deducted, including the electricity consumption derived from its recharging.

What this means for you

If you are a professional or self-employed, this criterion significantly limits the ability to deduct mobility expenses if you use your private vehicle for both work and personal trips. The existence of private use, however minimal, invalidates the deductibility of all vehicle expenses. The applied regulations, based on the RIRPF and the LGT, require a total separation between personal and professional assets for this type of asset.

What should be done

Given this situation, it is necessary to analyze the nature of the vehicle's use. If the activity requires the use of a passenger car, one should evaluate the possibility of maintaining a strict separation of uses or consider other mobility alternatives that comply with the exclusive assignment requirements demanded by current regulations. Each particular situation must be assessed to determine its compliance with tax regulations.