Spain

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What are the different car taxes?
Following the registration of a car and its use on public roads in Spain several car taxes become due, namely:

• Registration tax
• Annual circulation tax

REGISTRATION TAX

Taxable event
This excise duty (Impuesto especial sobre determinados medios de transporte) is payable when a new or second-hand car is registered for the first time within Spain for use by individuals or entities resident in Spain or in possession of an establishment in Spain. 

Additionally, when a vehicle is used in Spain by a Spanish resident or established and a registration has not been applied for within 30 days (or 60 days under specific conditions) following the date of starting using the vehicle, registration tax also becomes due. 

Certain vehicles are not subject to this excise duty (cars exclusively destined for the transport of goods or passengers or those used just for industrial, commercial, agricultural, clinical or scientific purposes, cars for disabled people, cars destined for defense/safety purposes, ambulances, certain types of vans/minibuses, cars under the tourist plate regime). 

In some cases (e.g., cars destined to defense/safety purposes and ambulances), previous authorization from the Spanish Tax Authorities is required. For the rest, a declaration by the taxpayer that such vehicle is not subject to matriculation tax needs to be filed before the Spanish Tax Authorities.

Moreover, certain vehicles are exempt from this excise duty (taxis, cars for driver’s teaching, hire cars, diplomatic posts and international organizations, vehicles registered in another EU Member State rented to a supplier of another EU Member State as well, by individuals or entities resident in Spain, for a period not exceeding the term of three months, etc.) although prior authorization from the Spanish Tax Administration is normally required. 

Taxable person
In principle, due by the person who has registered the vehicle in his name. Also, the person using the vehicle in the case of 30 days use with no registration applied for shall be liable for the tax.

Tax due
The tax on registration of the car is based on CO2 emission of each vehicle (according to Law 34/2007 dated on November 15, regulating air quality and atmosphere protection) and depends on each Autonomous Region (however, general tax rates are established for the event that a certain Autonomous Region has not established such tax rates).

The taxable base concerning new means of transport shall match with the VAT taxable base (or equivalent tax) and in the absence of VAT taxable base it shall be calculated according to the total amount paid by the car’s acquirer, determined according to article 78 of the Spanish VAT Law’s rules. 

For used cars, the taxable base shall be the market value of the car at the moment the tax is due. In case of used cars previously registered abroad, the market value will be reduced (if it is included in the price) by the residual amount of the indirect taxes in the case that the means of transport would have been considered as “first registered” in Spain if it were new.

In order to determine the market value, taxpayers will be able to use the prices approved by the Ministry of Economy in force at the tax point.
The tax rates range from 0% to 14.75%, although in Canary Islands they range from 0% to 13.75%. Emission shall be stated within a certificate issued by the car manufacturer/importer or the MOT (Technical Inspection Card or Roadworthiness Test) or any other official document issued in relation with the relevant car. Cars that produce less than 120 grams of carbon dioxide (CO2) per km will be exempt from registration tax, while those that emit more than 200 grams per km will pay 14.75%. There are two intermediate bands of 4.75% and 9.75% tax for cars of 120-160 grams per km and 160-200 grams.

No taxation on registration of cars is due in Ceuta and Melilla although special rules are foreseen in certain cases, when the car is firstly matriculated in said territories but subsequently moved to Spain or the Canary Islands. Special rules are also foreseen in case the car is firstly matriculated within the Canary Islands and subsequently moved to Spain. 

Resale companies can recover part of the registration excise duty (in proportion to the car’s market value at the delivery moment) when they deliver cars outside Spain provided that: 

• The cars will not come back to Spain (delivery outside the Spanish territory shall be definitive).
• Such delivery should be done within four years as from the car’s first definitive matriculation.
• A certificate of the car’s de-registration shall be needed in order to prove the delivery’s definitive character.
• The delivery of the car outside the Spanish territory shall be done as a consequence of a firm sale.

The recovery of the registration excise duty may be applied on a quarterly basis through the form 568 to be filed within the 20 first following days since the end of the relevant quarter. 

Tax period
This tax becomes due at the time the car is registered for the first time within Spain or the day following the 30 days period in the case of use with no registration applied for. 

ANNUAL CIRCULATION TAX

Taxable event
An annual circulation tax (Impuesto sobre vehículos de tracción mecánica) becomes due on vehicles registered in Spain and suitable for circulating within public roads. The tax is payable to the town hall where the car is registered. 

However, official vehicles of the Public Administrations or diplomatic and international organizations, ambulances, cars for disabled people, vehicles for the transport of passengers and agricultural vehicles are exempt from this tax. Other exemptions may apply as a consequence of international treaties. 

Taxable person
The annual circulation tax is, in principle, due by the person mentioned on the registration form of the vehicle.

Tax due
The tax rate is based on engine power for cars expressed in fiscal horsepower and calculated on the basis of the cubic capacity of the engine.

Power and class of vehicle.    Cuota - Euros

A.    Private cars:     
Less than eight fiscal horsepowers    12,62
From 8 to 11.99 fiscal horsepowers.    34,08
From 12 to 15.99 fiscal horsepowers.    71,94
From 16 to 19.99 fiscal horsepowers.    89,61
From 20 fiscal horsepowers and over.     112,00

B.    Buses:     
Less than 21 seats    83,30
From 21 to 50 seats.    118,64
More than 50 seats.    148,30

C.    Trucks:     
Less than 1.000 kilograms of payload.    42,28
From 1,000 to 2,999 kilograms of payload.    83,30
From more than 2,999 to 9,999 kilograms of payload.    118,64
More than 9.999 kilograms of payload.    148,30

D.    Tractors:     
Less than 16 fiscal horsepowers.    17,67
From 16 to 25 fiscal horsepowers.    27,77
More than 25 fiscal horsepowers.    83,30

E.    Trailers and semitrailers pulled by motorvehicles.     
Less than 1,000 and more than 750 kilograms of payload.    17,67
From 1,000 to 2,999 kilograms of payload.    27,77
More than 2,999 kilograms of payload.    83,30

F.    Vehicles:     
Motorbikes.    4,42
Motorcycles up to 125 cubic centimetres.    4,42
Motorcycles from more than 125 to 250 cubic centimetres.    7,57
Motorcycles from more than 250 to 500 cubic centimetres.    15,15
Motorcycles from more than 500 to 1.000 cubic centimetres.    30,29
Motorcycles from more than 1.000 cubic centimetres.    60,58

In this respect, the Ministry of Finance establishes the basic tariffs (except for the Basque country) although the town halls have the power to add a multiplying coefficient (not higher than 2) and to establish different allowances (e.g., benefits depending on the car’s fuel or engines due to ecological reasons).

Tax period
The tax is an annual tax. However, in case of registration of the car or removal of the car, the tax period is from January 1 to the date of this fact and the tax due (settled on an annual basis) is proportionally reduced. 

Income taxes – taxable persons
For direct tax purposes, the costs related to vehicles (including non-recoverable taxes) are fully deductible either as depreciation or as operating expenses (such as maintenance) if the vehicles are used for business purposes and the relevant documentary evidence duly supports the related expenses.

In principle, the manner of acquiring a vehicle by a company is not relevant for determining the level of deductibility for direct tax purposes.

VAT

General
Spanish VAT at the standard rate of 21% is due on the import, supply or acquisition of cars. 

The reduced VAT rate of 4% is due on cars for disabled people and special taxis for the transport of disabled people (in this case, prior recognition by the Spanish Tax Authorities is necessary). 

In addition, diplomatic and international organizations are exempt from Spanish VAT on the acquisition of their cars although prior acknowledgement is required. 

Deduction
In general, VAT paid on the import or acquisition of a car would be deductible if the cars are bought exclusively for business use.
Should the car be used partially for professional activities and partially for private purposes, there is a presumption giving the right to deduct 50% of the VAT paid on the purchase, import, lease, and repair, including the purchase of spare parts and petrol. If a different apportionment is obtained and it can be proved, initial deduction will have to be regularized. 

However, vehicles for the transport of goods or passengers, for commercial or sales agents, used by its manufacturers for testing, trials, demonstration or sales promotion purposes or used for vigilance services purposes, cars for drivers’ teaching, among others, will be presumed to be used 100% for business purposes. 

Hire purchase
For VAT purposes a hire purchase in Spain is a supply of goods. 
Interest paid is deemed an exempt financial service and must not be included in the taxable amount for the hire purchase when separately shown on the invoice. 

Regarding the taxable event, VAT due must be paid when the car is put at the disposal of the hirer/purchaser. 

Leasing
A lease agreement will be treated as a supply of services if there is no purchase option or commitment to exercise the purchase option. VAT is due on every lease quota. 

Interest paid is deemed an exempt financial service and must not be included in the taxable amount for the lease agreement when separately shown on the invoice.

If, during the lease agreement, the purchase option is exercised, the transaction qualifies as a supply of goods at that point, (up to then, it is a supply of services) the taxable base being the residual value of the goods. 

Likewise, in those cases where there is an original commitment to exercise the purchase option, the transaction qualifies as a supply of goods as from the beginning, the VAT being due at the time the good is put at the lessee disposal. 

Company car

VAT due on private use of company cars
The private use of a car by an employee could qualify (depending on the way this is articulated) as a taxable supply of services, and the employer would then need to charge VAT onto the employee proportionate to the 50% of such private use, with the employer then having 100% right of deduction. Please note that this criterion is only applicable for VAT purposes.

As previously mentioned, should the car be used partially for professional activities and partially for private purposes there is a presumption giving the right to deduct 50% of the VAT paid, although if a different apportionment is obtained and it can be proved, then the initial deduction will have to be regularized (except vehicles for the transport of goods or passengers, for commercial or sales agents, used by its manufacturers for testing, trials, demonstration or sales promotion purposes or used for vigilance services purposes, cars for drivers’ teaching, among others, that is presumed to be used 100% for business purposes). 

Company car in personal tax returns – benefit in kind
Private use of a company car by employees is deemed as a benefit in kind for Spanish personal income tax purposes. The private use should be settled on a case-by-case basis based on a reasonable criterion.

The company will have to make a payment on account to the Treasury on the fringe benefits paid to employees, at the employees’ general withholding rate, being the valuation rules the following:

Supply of the car to the employee (payment in kind), which becomes the owner of the car: acquisition cost for the entity, including the taxes (VAT, tax on registration, customs duty).

In case of use of the car by any title (but the employee does not acquire the car’s ownership):
–    Cars owned by the company: 20% per year of the acquisition cost
–    Cars not owned by the company (leasing): 20% per year on the market price of the car if it were new.

Use and subsequent supply of the car to the employee:
–    Use: to be valuated according to the above
–    Subsequent supply: the market price of the used car at the moment of first supply

Income taxes – drivers’ personal taxation

Private car in the personal tax return

Private use
The vehicle costs made in respect of the private use of a vehicle are not deductible in the employee’s personal tax declaration.

Commuter traffic
Use of company cars by employees for commuting purposes is considered as private use and thus a benefit in kind, subject to withholding tax (payment on account). In this sense, the rules above are fully applicable.

Business kilometres
In case of use of employees’ own cars for business journeys, reimbursements by the employer not exceeding 0.19 EUR per kilometre is tax free and not subject to withholding tax. Amounts exceeding 0.19 EUR per kilometre are subject to withholding tax.

SPECIAL TERRITORIAL SCHEMES

Canary Islands
Importation of cars into the Canary Islands coming from outside the EU is currently subject to customs duty at 10%. 
Supplies of cars are subject to IGIC 13.5% or 9.5% (depending on the power), 6.5% (vehicles intended for specific uses and/or depending on certain technical specifications) or 3% (cars and taxis for disabled people). 

Imports and supplies of hybrid electric vehicles that do not exceed 110 grams of CO2 per kilometre on their emissions, and electric vehicles, except sport or recreational vehicles and those driven on rails installed on the road, are subject to IGIC and shall be applicable a tax rate of 3%.

Input IGIC incurred on purchasing the cars will be only recoverable in case of cars used exclusively for the purpose of the purchaser’s business activity (or in case of specific vehicles such as those for the transport of goods or passengers, for driver’s teaching, etc.).
No presumption analogous to that existing in the VAT Law has been implemented for IGIC purposes up to date.

Ceuta and Melilla
Importation of cars within these cities will be subject to IPSI (tax on importation, services and production), as general rule, at 10%. For these purposes, in order to determine the taxable base of the IPSI on importation the same rules as for the calculation of the taxable base of the VAT on importation will be applicable.

Electric vehicles
Measures in this respect depend on each autonomous region. Royal Decree 294/2013, of April 26 and Royal Decree 1078/2015, of November 27, regulate granting of subsidies for the acquisition of electric and other alternative energy vehicles.

Additional regulations affecting the vehicle fleet
Following the provisions laid down in the National Plan for Air Quality and Atmosphere Protection (Plan Nacional de Calidad del Aire y Protección de la Atmósfera 2013-2016), Spanish traffic authorities have proposed to classify the vehicle fleet according to the level of polluting gas emissions and to place different labels within the vehicle fleet according to that classification. 

The main objective of this classification is the positive discrimination of the most eco-friendly vehicles. In addition, it was designed to be an effective instrument for municipal policies, for instance, those restricting the traffic in high pollution situations.  

At state level, the placement of these labels is voluntary. However, some city town halls (Madrid) have already established the obligation to affix these labels in order to restrict the access of the most polluting vehicles to certain city sectors.  

FUTURE DEVELOPMENTS
The Spanish Government allows the use of the WLTP-NEDC correlated value until the end of year 2020 in order to reduce the immediate tax impact of the introduction of the WLTP regulations (for instance, the potential modification on the registration tax rate).