Taxation is applied to all phases of a car's life, from its manufacture to its repair and the purchase of spare parts.
The Spanish automotive industry also has a strong influence on the economy, employing 10% of the country's workers and accounting for more than 25% of exports.
Spanish car taxes can be grouped into two categories: the first is national taxation specific to the automotive sector and the second is local taxation applied by the different local or regional administrations of Spain.
National taxation is applicable to direct taxes (corporate tax, personal income tax) and indirect taxes (VAT and excise duties). Local taxation is applicable to the circulation (driving) taxes connected with the possession or ownership of a vehicle.
In principle, the tax treatment of the costs related to vehicles (including indirect taxes and other non-recoverable taxes) will be the same as that for accounting purposes. This means they will be fully deductible either as depreciation of the assets or as accounting operating expenses, provided that the vehicles are used for business purposes and that related expenses are duly supported by the relevant documentary evidence, such as complete invoices, agreements, etc.
If vehicles are accounted for as assets, either as tangible or intangible, the depreciation recorded in accounts, following Spanish Corporation Tax (CTA) procedures (the most common being linear depreciation at a maximum of 16% per year for passenger cars, minibuses and vans), will be allowed as a deductible expense. The tax treatment of lease vehicles may have specific tax treatment for both lessor and lessee depending upon the type of leasing agreement.
VAT at 16% is due on the import, supply or acquisition of almost all cars. Diplomatic and international organisations are exempt from VAT on the acquisition of their cars but prior acknowledgement is required from the Spanish Tax Administration.
In general, any VAT paid on the import or acquisition of a car would be deductible by companies or professionals if the cars are bought exclusively for business use. If the car is used partially for professional activities and partially for private purposes there is a presumption that the use of the car by the company or professional is 50%, giving the right to deduct 50% of the VAT paid on the import, lease and repair, including the purchase of spare parts and petrol.
In Spain a lease agreement will be treated as a supply of goods if the customer has to exercise the purchase option. If not, the lease agreement will be considered as a supply of service up to the time the purchase option is exercised and then the residual portion would be considered a supply of goods.
Tax on car registration
Impuesto Especial sobre Determinados Medios de Transporte is an excise duty and payable once at a rate of 12% (applicable to new and second-hand cars) when a car is registered for the first time within Spain for use by individuals or entities resident in the country.
The tax-payer responsible for the payment of this excise duty is the individual or entity that registers the car in its own name, although a legal exemption allows the tax-payer to be the person or entity that uses the car.
Certain vehicles are exempt from this excise duty (taxis, hire cars, cars related to movement of residence, cars registered by disabled for their exclusive use, diplomatic posts and international organisations) but prior authorisation from the Spanish Tax Administration is required. The taxable base for new cars is the same as the taxable base applied for VAT purposes. For second-hand cars, it is their market value at the time of registration.
Remarketing companies can recover the registration excise duty when they deliver cars outside Spain.
Annual circulation tax
An annual circulation tax (Impuesto de circulacion) is levied on all motor vehicles. This tax is payable to the town hall where the car is registered although the Ministry of Finance establishes the basic tariffs in the National Budget (except for the Basque country which establishes its own tariffs).
Once the National Administration has published these basic tariffs, different town halls have the power to add a multiplying coefficient (up to a maximum of two according to the type of car, regardless of the number of citizens in the town). The rate of taxation is based on engine power for cars expressed in fiscal hp and calculated on the basis of the cubic capacity of the engine.
For accounting purposes from the lessee perspective, lease agreements are treated in two different ways by Spanish Standard Accounting Rules:
Drivers' personal tax fact file
For company cars used for private purposes by staff in Spain, the first point to determine is the element of private use.
There are no official rules that can be applied in all cases, and the tax authority's position is that the apportionment must be made on a case-by-case basis. It also considers that the use of a car for commuting to work is private use, as well as weekend or holiday use.
The most common systems used by companies are either based on time or mileage, although they must be able to prove that their system reasonably represents the actual private use of the vehicles in the case of a tax audit.
The valuation of the taxable fringe benefit in the case of the use or supply of vehicles will be based on the following rules:
For example, a company puts at the disposal of two employees two new SEAT Toledo TDIs, each worth 25,000 euro (including tax).
The vehicles are leased under an operating lease from a third party supplier. The monthly cost of each lease is 500 euro.
One employee is in the sales department and has a private use of 30% based on a time apportionment. His personal withholding rate is 25%.
The other is the finance director whose private use of the car amounts to 60%. Her personal withholding rate is 40%.
Payment on account to be made by the company: 1,500 euro x 25% = 375 euro.