Back to the subject of company cars
A great many companies have cars acquired under “renting” agreements, the use of which they assign to their employees. In cases of combined use of such vehicles (for work-related and for private purposes), the main sticking point is the quantification of the private use percentage, since it is only the proportional part of the use made of the car by the employee for his/her private enjoyment which is classed as a payment in kind.
The DGT has issued numerous rulings advocating the application of a criterion for distribution between private and work-related use which is concordant with the nature and characteristics of the functions performed by the employee. Although no general rule is provided for the purpose of determining the private use percentage, the view expressed is that quantification methods based on the hours of actual use made of the car or kilometrage are not acceptable, since the decisive factor should be the availability of the car for private purposes rather than the actual use made of it.
Recent rulings of the DGT have clarified that the car is not available for private use when it remains at the company during non-work periods or when it is returned to the company’s premises at the end of the working day (rulings of October 26, 2015 (V3296- 15) and October 5, 2015 (V2867- 15) respectively.
The fact of the car bearing the company’s logo therefore makes no difference to the private use percentage.
On the other hand, both the Inspectors and Courts generally accept that the use made of a vehicle for private purposes is more limited in the case of employees who perform commercial functions.
In view of the difficulties involved in quantifying the private use percentage, and to avoid possible tax contingencies resulting from an incorrect valuation of payments in kind, companies can apply for an advance valuation agreement with the tax authorities (in respect of both the value of the vehicle and the private use percentage) in accordance with the provisions of article 91 of General Taxation Law 58/2003 of December 17, 2003 and Additional Provision Two of the IRPF (personal income tax) Regulations.
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