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11 October 20232 minute read

VAT treatment regarding company cars

The use of company cars has traditionally generated controversy from a VAT and withholding tax perspective. As a result, the Spanish Tax Authorities have published guidelines which sets out the main criteria to be applied in this area, following the judgment of the CJEU and Spanish Case Law.

  • In brief the Tax Authorities state that:
  • If the vehicle is used for business and for private purposes, such personal use should be considered in proportion to the availability and use of the vehicle for private purposes. Consequently, taking a working day of eight hours-a-day for five days a week, a reasonable percentage of use could be around 20% for business purposes and 80% for private purposes. This percentages may vary depending on the characteristics of the work performed and the collective bargain agreement.
  • The supply of a vehicle to an employee may be regarded as a VAT taxable transaction where the employee pays a consideration to the employer, whether in cash, in kind, or in the form of a waiver of economically valuable rights.
  • VAT borne on the acquisition of the vehicle is deductible provided that it is assigned to an economic activity subject to VAT, taking the above into account.
  • If the employer deducted input VAT on the acquisition of the vehicle and it is subsequently supplied to the employee free of charge, it should be treated as VAT taxable self-supply.
  • The taxable basis (either in a VAT taxable supply or in a self-supply scenario) is the market value of the supply to the employee.



The Spanish Tax Authorities will apply these criteria in tax audits. Consequently, businesses should follow them to avoid potential challenge.