Many freelancers use the car in their day-to-day lives to be able to carry out their professional activities.
The question is, can a freelancer deduct the car? There are different assumptions depending on how you use it. Keep reading.
Deduct car VAT
For many freelancers, being able to deduct personal income tax and VAT from the purchase of the car is a real headache due to all the obstacles that the Treasury puts up.
In any case, it will always be easier to deduct the VAT from the car than to deduct the IRPF, but you must have everything very well justified.
To be able to deduct the VAT from the car as a self-employed person, it is essential that you can demonstrate that you use it for your activity, at least partially.
If you use it in its entirety to work, you can still get a higher percentage.
The exciting thing is that in this way, you can deduct deductible expenses related to the car, such as gasoline, maintenance and spare parts, parking or tolls.
The VAT regulations focus their deduction percentages on the so-called “degree of affectation”. This depends on the use you give to the vehicle.
If you only use the car to carry out your professional activity (solely and exclusively), you can deduct 100% of the VAT, but it takes work.
As a general rule, the VAT regulations allow you to apply a deduction of 50% of the VAT you bear when purchasing a vehicle.
But if you want to deduct what you consider to be yours, and you know you can show that you need it to work, the percentage changes and could even go up to 100% deduction.
In addition, it is essential that you know what type of car you have because both VAT and personal income tax regulations have the same classification.
what type of vehicle is fully deductible
- The mixed vehicle, the van you use to carry materials but that could also carry people, is 100% deductible. This is so because it typically has your business name labelled, you usually have another car for private use, and it is usually listed as a vehicle with an industrial alternative.
- The vehicle used for passenger transport services with customer payment is 100% deductible, for example, taxis.
- The vehicle used for teaching drivers or pilots through payment is 100% deductible, for example, driving schools.
- The vehicle its manufacturers use for tests, trials, demonstrations or sales promotion is also fully deductible.
- The vehicle used by representatives or commercial agents on professional trips is 100% deductible.
- The vehicle used in surveillance services is also fully deductible.
In any case, it is necessary that you record the purchase of the vehicle in your book of received invoices, or what is the same for expenses and purchases or investment goods.
To prove that you use the vehicle in your activity, you must have documents showing that you travel to earn income.
For example, the address of your clients, schedule of visits, accepted budgets, the place where the service is provided or the goods are delivered, etc.
It is clear that this “justification” will be more straightforward for you to achieve depending on the activity you do.
In other words, the need for a vehicle differs for a commercial agent than for a lawyer or a physiotherapist…
And remember that permanently, in any case, you should save emails and invoices.
Deduction of a vehicle in the IRPF
With personal income tax, the mess is even more significant, there are no half-measures, or you deduct everything or nothing. If you use the car for your activity and your private use, you cannot deduct anything from the car from your income tax.
On the other hand, if you use the vehicle exclusively for your activity, you will have to prove it, and you can deduct the total purchase amount.
For example, this would be the case of a taxi driver or carrier.
It is important to note that there is no clear criterion. But most of the Administrative Courts tend to deny the deduction of this expense.
This is so because it is not easy to separate the vehicle from private use 100%. However, some are already changing their criteria, making this statement more flexible.
Therefore, if you believe that a vehicle deduction is possible and you include it in your return, remember that the Treasury could consider that this is not the case and ask you for explanations.