This income statement is a routine reality for millions of Spaniards each year before June 30. As the 2023 campaign closes, it matters to understand how buying a vehicle can affect treasury accounts. The following notes cover tax implications and potential deductions for employees, the self-employed, and companies alike.
Do I have to declare that I bought a car?
Generally, buying a new or used car does not require a separate declaration since key taxes such as VAT, Registration, and the Circulation Tax are settled at the point of purchase. In some situations, however, including the vehicle purchase in the personal income tax return can be advantageous to access discounts or reductions that apply to individuals, the self-employed, or companies.
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Deductions for employees
For employees who have bought a new car, general rules do not allow deducting purchase costs. There are, however, specific exceptions that can apply depending on circumstances.
- Persons with a disability of 33% or higher may deduct up to 4% of the VAT paid on a vehicle purchase and are exempt from the Registration Tax and the IVTM Mechanical Traction Vehicle Tax.
- Large families may deduct up to 50% of the Registration Tax, though VAT deductions may not apply.
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Deductions for self-employed
Self-employed individuals face deductions that vary with the nature of the business activity. Some examples include the following:
- Freelancers in transportation related fields such as taxi or rideshare drivers, carriers, driving schools, and similar roles can deduct up to 100% of the VAT, as well as fuel and maintenance costs, provided the vehicle is used exclusively for business purposes.
- Freelancers not linked to transportation may deduct up to 50% of depreciation, interest, and VAT, and up to 50% of fuel costs, as long as the vehicle is used solely for business purposes.
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Deductions for companies
When employees drive a company vehicle, the company can deduct an annual portion of the vehicle’s cost, including taxes and related expenses. Should the vehicle be used for personal purposes as well, this use must be declared as a benefit in kind.
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Assistance with MOVES plan and taxation
The MOVES plan supports the purchase of electric vehicles or the installation of charging stations. This benefit should be reflected in the income tax return as a form of capital gain. The payable amount depends on the benefit received, the applicable tax rate, and the general tax base.
In short, knowing the tax deductions and consequences tied to vehicle purchases is essential when preparing the 2023 Income Statement. Whether an employee, a self-employed individual, or a company, these deductions should be reviewed and correctly included in the personal income tax return.
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Recommendations for 2023 Income Statement
To ensure a smooth filing and maximize tax benefits, consider the following steps:
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Carefully review the draft return provided by the Tax Office for any errors or missed deductions.
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Consult a tax professional for personalized guidance and to avoid mistakes in the filing.
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Be mindful of the Tax Office deadlines for submitting returns and claiming relevant deductions.
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The vehicle purchase can influence the income statement. Depending on one’s job and personal situation, certain tax deductions may apply. It is wise to review and prepare the personal income tax return to fully benefit from these tax breaks and to meet tax obligations.
Taking full advantage of the 2023 tax deductions helps avoid surprises. Understanding the vehicle-related tax implications can help optimize accounts with the treasury.