The company wants to buy a cargo van for business purposes at a price of 110 thousand. euro. The N1 category cargo van has a gross weight of up to 3,500 kilograms and has four seats. Does the company have the right to deduct 100% of the value added tax (VAT) input tax for vehicle maintenance? Will the car need to be equipped with a global positioning system (GPS)? Will the vehicle still be considered a representative vehicle?
When evaluating the situation, it is important to see Article 100 of the Value Added Tax Law (VAT Law) and the Corporate Income Tax Law (VAT Law).
The specified price of the cargo van is 110 thousand. euro, which could indicate that the car belongs to the representative car category. However, according to the definitions of the VAT Law and the CIT Law, a truck (N1) is considered representative if it meets all the criteria set by the law:
the value of the car exceeds 50 thousand. euros without VAT; gross weight is up to 3000 kilograms; registered as a cargo van; classified as a truck (N1), but essentially a passenger car (M1); has more than three seats. In the described situation, the cargo van that the company intends to purchase , meets four out of five criteria, ie its gross weight is greater than 3000 kilograms. Therefore, the car cannot be classified as representative in the sense of the VAT law and the CIT law.
From the point of view of the VAT law, this cargo van will not be subject to the regulation of Article 100, Part 1.1 of the VAT Law, as well as the provisions of Article 100, Part 2. Consequently, the exception procedure for deducting VAT input tax in an incomplete amount does not apply. Since, in the given situation, the cargo van will have been used for the transportation of cargo of the appropriate size, in the course of economic activity, in the given situation, the VAT input tax in the amount of 100% for the vehicle and expenses for car repairs and used fuel can be deducted.
If the full weight of the car is up to 3000 kilograms
The situation would be more complicated if the full weight of the cargo van (N1) was up to 3000 kilograms. Then, in the sense of the mentioned laws, such a cargo van would be classified as a representative car and it would be subject to the regulation of Article 100, Part 1.1 of the VAT Law. However, the fact that the cargo van will be used for the purposes of economic activity, under certain conditions, would allow the input tax to be deducted for the representative car as well.
Cargo vans (N1), which have been used for the transportation of goods of appropriate size and weight, are not considered passenger cars in the sense of the VAT law, therefore, Article 100, part 2 of the VAT law, which allows deduction of 50% input VAT tax, would not apply to the vehicle amount.
If the full weight of the cargo van was up to 3,000 kilograms, the situation should be evaluated taking into account Section 100, Parts 3 and 4 of the VAT Law. Article 100, Part 3 of the VAT Law defines a number of cases when the company is entitled to deduct the VAT input tax on the purchase and maintenance of the vehicle in full. A registered taxpayer can deduct 100% of input VAT in the following situations:
- for a car that was purchased, leased or imported: for passenger transport for remuneration;
- for the provision of rental services; for the provision of goods transport services;
- the car is an operational vehicle; the car is used as a car dealer's demonstration car;
- the car is used only for the provision of taxable transactions within the scope of its economic activity.
Thus, if a cargo van with a full weight of up to 3,000 kilograms was used for the transport of goods, then the company would have the opportunity to deduct 100% of the input VAT, despite the fact that the cargo van is classified as a representative vehicle.
However, in order to realize these rights, the taxpayer should prove that the car was used only for the performance of economic activities and for the provision of transactions subject to VAT. In order to prove this, according to Article 100, Part 4 of the VAT Law, the taxpayer would be obliged to equip the cargo van with GPS. If GPS is not installed in the car, the taxpayer is not entitled to deduct input VAT.
Source: iFinanses