Deduction of VAT on the transfer of vehicles

One entity gave vehicles for use to its employees without applying flexible remuneration schemes.

The entity deducted 50% of the VAT quotas supported by the vehicle leasing and did not consider this provision as a tax subject operation, therefore, it did not repercuss VAT to the employees. The Administration held that the entity could deduct 100% of the supported quotas, but should have repercussed VAT to the employees for the value of the private use of the vehicles.

The Supreme Court, in its ruling dated January 29, 2024, in line with the National Court, annulled the liquidation and concluded that the Administration's recognition of the deductibility of the supported VAT does not necessarily imply that the provision of the vehicles constitutes an onerous operation subject to the tax.

If the Administration considered that there were onerous operations, it had to demonstrate that there was a counterpart from the worker for the provision of the vehicle use, which does not occur outside of a flexible remuneration system or similar.