Deduction of VAT on the purchase of a car: when do you qualify?

Do you use your car for business and private purposes? Make sure you keep the necessary records.

Many people use their cars for business and personal use. However, be sure to keep the different uses separate on your records. If you do not keep proper records, the tax authorities can easily reduce your input VAT deduction.

Natural persons who are VAT-registered businesses can usually claim a deduction for inputs used for taxable transactions (e.g. the supply of goods). However, if you also use the input, in this case a car, privately, your entitlement to deduction is reduced. The amount of the reduction depends on how much you use the car for each activity.

How do the courts see it?

A similar case was recently decided by the Supreme Administrative Court (SAC). before it questioned the legitimacy of a company's claim for a tax deduction on the purchase of a passenger car.

One of the pieces of evidence presented was a logbook. The latter did not agree with the handover report requested by the tax administration from the seller of the vehicle. The tax authority therefore also obtained CCTV footage of the vehicle's movements from the Police. When comparing all the evidence, the court found that the data on the movement of the car did not correspond with the information in the logbook submitted.

Although the company disputed the method of obtaining the evidence from the police, the SAC held that sharing previously obtained records for tax administration purposes was possible. Consequently, the court concluded that the company had failed to prove that the conditions for claiming the tax deduction - namely the use of the vehicle in the course of business - were met. The tax authorities therefore ultimately disallowed the entity's claim.

Want to make sure you are paying VAT correctly?

Ask our specialists for a consultation. They will be happy to check that your records are in order and suggest any changes. And if you don't want to worry about VAT, we'll be happy to take over the bookkeeping for you.

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