Discover the Vehicle-Related Expenses You Can Deduct as Expenses

Does your company have a fleet of vehicles? For businesses that rely heavily on the use of vehicles, having a thorough understanding of which vehicle-related expenses are deductible can make a crucial difference to your financial health.

In this article, we'll take a look at the vehicle-related expenses that can be considered legitimate and deductible expenses for your business.

Vehicle Expenses Deductible for Corporate Tax Purposes

The following expenses are deductible for corporation tax purposes as long as the company can demonstrate that it requires the vehicles to carry on the business:

1. Fuel: Fuel expenses for vehicles used in the context of your business are fully deductible. Keeping a detailed record of each fuel purchase, specifying the date, amount and business purpose, is crucial to justify these deductions.

2. Maintenance and Repairs: Any costs related to the maintenance and repairs of vehicles used for business activities are deductible. This ranges from simple oil changes to mechanical repairs and regular maintenance services.

Vehicle Insurance: Commercial vehicle insurance premiums are fully deductible expenses in Spain. This includes both liability insurance and accident insurance.

4. Vehicle Loan Interest or Renting Fees: If your company has acquired a vehicle through a loan, the interest paid on the loan is deductible as a financial expense.

5. Vehicle-Related Taxes and Fees: Taxes and fees paid on vehicle ownership are deductible. This includes motor vehicle taxes and any related fees.

What if the company vehicle is used for private purposes?

If the vehicle is used by any employee, either for work or for private purposes (e.g. access to the vehicle at weekends or at the end of the working day), the vehicle will have to be included as remuneration in kind. Specifically, the annual valuation of the vehicle loan is 20% of the market value of the vehicle.

However, there is a reduction in this market value based on the energy efficiency and the price of the car:

1. 15% deduction: applicable to vehicles that do not exceed 120 g/km in CO2 emissions and whose price does not exceed 25,000 euros.

2. Deduction of 20%: Hybrid or internal combustion autogas, LPG and Natural Gas vehicles up to 35,000 euros.

3. 30% deduction: Reserved for battery electric vehicles (BEVs), extended range electric vehicles (E-REVs) and plug-in hybrid electric vehicles (PHEVs) with a minimum range of 15 km and a price not exceeding 40,000 euros.

Keeping clear and detailed records of all vehicle-related expenses is essential. Documents such as invoices, receipts and rental contracts should be kept in an organised manner to support deductions made on company tax returns.

At CIM, we have experts ready to assist you in complying with Spanish tax regulations. With proper management and a thorough knowledge of tax regulations, your company can achieve the success you desire.