Complete Guide to deduct car expenses

Anyone who works in a tax consulting firm will know very well that one of the most frequent questions asked by the client inexperienced regarding how and to what extent deduct the costs of its own means of transport, and in particular those of the car.

In general there is some confusion on the subject, and because the rules on this matter are numerous and varied, and because the rules themselves have undergone changes in recent years also chaotic, both jointly derived from the need to increase taxation than from that of adapting our legislation to the information provided by the European Court of Justice.

But now, finally, the law seems to have found an equilibrium that is expected to last over time, you can make the point clear and well-rounded legislation.

Please note in advance that the speech relates exclusively to businesses and professionals (the so-called "people of VAT"): private citizens, in fact, can not deduct the cost of transport from the income, if not absolutely rare cases, such as the use of means customized by the handicapped.

On the other hand, however, to all private citizens is recognized IRPEF deduction of 19% of the cost of subscriptions to local public transport, up to a maximum of € 250 per annum: but this is a transitional provision, which could not be confirmed in the coming years.

But also in relation to the car, in fact, there is a small item that can be taken into consideration, even if a benefit is not well known: it is the contribution to the National Health Service that you pay within the insurance policy for civil liability. This contribution, usually of modest amount is fully deductible from income.

Much more complex, however, is the situation of a VAT.

Checking the situation of businesses and professionals, the first thing to consider is that all expenses related to their personal means of transport are affected by the rule: the purchase, rental or leasing, maintenance costs (such as those at the gas station, the mechanic, the tire dealer or an electrical repair), road tax (the so-called "car tax"); insurance policy for civil liability.

Except for stamp duty and for insurance (and for the purchase, if it occurs at a second-hand private), all the items above are subject to VAT. It is therefore necessary to separate the value of the value added from the total price, because the VAT rules are quite different from those provided for PIT / IRES.

The VAT Act provides a precise definition of the so-called "means of motor transport": are motor vehicles (except tractors) "are normally used for road transport of persons or goods whose maximum authorized mass not exceeding 3,500 kg and number of seats, excluding the driver, is not more than eight. "

Well, the VAT on costs related to these means is 100% deductible only to the agents and sales representatives, as well as for those individuals whose business is to buy and resell these goods (such as car showrooms), or in any case in which the use of such means is entirely instrumental activity, as it might be a driving school.

 

For all other figures of businessmen and professionals, VAT is deductible only to the extent fixed by 40%.

And the motorcycles? If their engine capacity not exceeding 350 cubic centimeters, we apply the same discipline of the car, otherwise VAT is deductible only when they are an integral part of the business (as is the case for retailers).

 

Once the share of VAT that you can deduct, it is necessary to ascertain the laws governing income tax. The deductibility of these costs from income for income tax proceeds according to common rules and IRES, and covers not only the bases, but also the share of VAT which was eventually found to be non-deductible, which is in effect an integral part of the cost incurred.

The Income Tax Act (917/1986) distinguishes, in Article 164, three different categories of motor vehicles, subject to different rules.

 

The first category consists of those assets whose use is entirely instrumental activities carried out by the firm (think, again, to a dealership or to a driving school) or will fall in the event that the means are used to public transport. In these cases, because you can not recognize your own use, related costs are deductible from business income to 100%.

The second case, however, the means that are used by employees left: in this hypothesis, the costs are deductible at 90%, with no particular distinction.

The third category is the most complex: it includes the means used promiscuously by the entrepreneur or professional, partly for business and partly for private purposes. The related costs are generally deductible from income to 40% (80% for agents and commercial representatives), but with some important caveats.

 

For example, it is determined that an artist or professional can download only the expenses related to a single medium, while in simple societies and associations, the upper limit is equal to half for each member or associate. For the generality of entrepreneurs, however, these limitations do not exist.

There are, however, other limitations on the deductibility covering all means of transport that fall into this third category.

 

When the entrepreneur or professional uses a motor vehicle that falls into the third category described (that of the means for mixed use), there are limits to the maximum deductible expense: any surpluses are fully deductible, no exceptions.

The first limit concerns the purchase: the possible cost that exceeds a certain threshold is tax unrecoverable.

This threshold is equal to € 18,075.99 for cars and caravans (€ 25,822.84 for agents and commercial representatives), to € 4,131.66 to € 2,065.83 for motorcycles and mopeds. If the property is leased, these limits refer to the license fees.

 

Ultimately, those who buy a Ferrari or a Lamborghini can not hope to discharge spending beyond a certain time with the excuse that acts as a means business.

The second limit is applied when the vehicle is leased or rental: here too there are thresholds of deductibility, amounting to € 3,615.20 for cars and caravans, motorcycles and € 774.69 for € 413.17 for mopeds . But beware: these thresholds are ragguagliate the actual duration of the contract. For example, if you take into renting a car for just one month out of twelve, the above threshold should be reduced to one twelfth, that is € 301.27.

 

Once you have determined "how much" you can deduct, the second problem is "when": that is, what the tax period shall be offset against these costs. With regard to the purchase cost, it is obviously amortized: the annual rate is 25%, reduced by half for the first year (but this reduction did not work for artists and professionals).

The speech becomes more complex when you take into account the expenditure items "current", other than those of purchase.

 

As for the expenses so-called "current", we must make a clear distinction between entrepreneurs on the one hand and the other artists and professionals.

For the former, count the period attributable to the expenditure, that is where concrete has taken advantage of the service, for the latter, instead counts the time when you are actually enforced the payment to the supplier.

If this distinction is not generally involves large consequences (if one day you change a tire, that is usually also the day when you pay the tire), this discussion leads to differences for those expenses "related" to a specific period of time : this is typically the stamp duty, insurance, rental, leasing.

 

Therefore, if on July 1, 2009 pay a professional to his insurer a policy year (until 30 June 2010), the entire cost will be deductible from income in 2009. However, if you make the same payment was an entrepreneur, then only half of the costs incurred will be deductible in 2009, and the other half in the following year, since the competence of this expenditure falls on horseback between two different tax periods.

Another issue to consider relates to the sale of the vehicle: subtracting the amount of the expenses incurred and not yet amortized purchase, you get a positive difference (gain) or negative (loss).

 

Well, the gain is taxable only to the extent that corresponds to the portion of the cost which at the time had been able to deduce, so if you had deducted 40%, then the capital gain is taxed at 40%. Same goes for the deductibility of capital loss.

If the property was owned by at least three years prior to the sale, you can pay in installments taxation of the capital gain up to a maximum of five annual installments of equal amount.

 

To download from the various expenses incurred income, of course, you need to document them. Where, you can have it (purchase, lease, maintenance ...), you need the bill.

Road tax and insurance of civil liability, which are excluded from VAT are not billed, but to deduce cost is sufficient to store the receipts.

In all cases, it is good that such documents might report the license plate of the vehicle to which it refers, to avoid doubts and disputes.

 

The more complex speech about fuel supplies, for which the gas station, as a general rule (with some exceptions), it is even forbidden to issue an invoice. These supplies are in fact demonstrated with a special document, the tab-fuel, which is drawn up every month or quarter, to free choice of the taxpayer.

In it are the general data on the vehicle (license plate, personal data of the holder, month or quarter reference ...).

It should also insert tab the total number of miles driven as indicated in the odometer, both the beginning and end of the period; noted this, however, is not compulsory for artists and professionals.

After filling up, the operator will indicate on the date, the type of fuel and the amount, and to affix his stamp and signature.

At the end of the period, the taxpayer will calculate in the queue to board the total expenditure incurred in the period and they separate it from the taxable amount and the VAT.

 

It should be added that in the life of every day including supplies of oil, coolant, and other such expenses are entered directly on-board fuel, instead of separately invoiced, for obvious reasons of simplicity, but it is a practice on the legitimacy of which are in any doubt .

But how do you do when the motorist is served directly to the cafeteria, without the attendant is in the area?

 

The problem referred to is frequent and has sparked several debates. A comprehensive response was offered by the Inland Revenue, with circular no. 205/1998: according to the writer, the card-fuel is never used when there is the personal service of the filling station, nor can you admit that provides the taxpayer to compile it themselves.

The only solution to document the costs of fuel purchased at the self-service is to keep the receipt or receipt issued automatically by the distributor and, at a later time, present it to the manager because the latter issues the invoice for the operation.

 

The prohibition for him to bill these supplies do not work in situations where it is legally excluded the possibility of using the card-fuel, just as in the present case.

The last problem associated with the use of the car tax does not apply to the "people of VAT" but the employees and the figures assimilated when using a company car.

This hypothesis is one of those so-called "fringe benefits" to employees, subject to tax at a flat rate: The taxable value of this fringe benefit is equal to 30% of the product of 15,000 and the cost per kilometer calculated annually by the Automobile Club d 'Italy for that type of vehicle and with reference to the conventional distance of 15,000 kilometers.

 

For example, if the employee is granted the use of a Ford KA owned business, as the cost per kilometer by ACI currently attributed to this type of car and reported to 15,000 kilometers traveled is equal to € 0.334865 per kilometer, the result of the operation described (cost per kilometer * 15,000 * 30%) is equal to € 1,506.89 which will be the value to be taxed by the employee, net of any expenses incurred by him and remained on him.

27/02/2009

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Translated via software

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Source:

Italian version of ReteArchitetti.it

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