Speakers: Carla Brighenti Public Accountant Davide De Giorgi Tax Lawyer

Transcription

1 Fiscal and administrative car park management Speakers: Carla Brighenti Public Accountant Davide De Giorgi Tax Lawyer

2 Fleet management guidelines IRES (Corporate Tax) and/or Irpef (Income tax of natural people) D.P.R.* December 22, 1986, no art. 164 TUIR Limitations applicable to the deduction of expenses and other negative components relating to certain motor vehicles used in the exercise of business, artistic and professional activities. IVA (VAT) D.P.R. October 26, 1972, no art. 19-bis1 Exclusion or reduction of detraction for certain goods and services. * = Presidential Decree

3 Info: DEFINITION OF COMPANY CAR The company car is a car purchased by a person with a VAT registration number

4 Info: - EARLY ASSUMPTIONS All the expenses and costs incurred by companies, to be deducted and to detract the Vat tax, must follow the principio d inerenza.* Italian Revenue Agency: A cost is inherent when it refer to the business activity or private practice concretely performed. EXAMPLE: A notary can never deduct, neither partially, the use and the invoice cost of a truck, because it s not possible compare a close inherent relationship between purchase and activity performed. TN.* = There isn t an equivalent translation in English. It would be for inherent principle.

5 Info: - Definitions of Detraibilità and Deductibility * Detraibilità is related to VAT; deductibility is referred to costs. We say that VAT can be detracted, partially detracted or non-detracted ; costs, instead, are deductible, partially deductible or nondeductible. Terms detracted and deductible define the field of treatment of taxes. TN. * There is no an equivalent translation for detraibilità, that is different from deducibilità (deductibility). The first one that can be translated as possibility to be detracted reduces the amount of the tax to be paid; the second one reduces the tax base, on which is calculated the percentage of the amounts to be paid;

6 Info: - Exclusion or reduction of detraction for certain goods and services as established by the Italian legislature following the decision of EU Council of Justice on June 18, 2007 (effective date June 27, 2007) VAT D.P.R. October 26,1972, no art. 19- bis1

7 Types of limitation VAT detraction relative to the purchase or leasing of a vehicle and costs related thereto (use, security, maintenance and repair service, toll, etc.) can undergo two types of limitation: subjective and objective. SUBJECTIVE OBJECTIVE

8 Info: - SUBJECTIVE type of limitation The VAT law establishes some limitations on the VAT tax detraction (paid on purchase of goods and service) when the goods and services are used to make exempt transactions or, anyway, not liable to any taxation. EXAMPLE: Services provided by the physician in the exercise of his profession, or services provided by financial intermediaries, or services provided by the insurance companies, are exempt from VAT under art. 10 D.P.R. 633/1972. Therefore, if on the one hand these services fees are not liable to VAT, on the other hand the VAT tax paid by these traders, in general, can t be detracted. The tax paid on purchase of goods and services used by non-commercial corporation and trade associations, that are not required to open the VAT registration number to perform their institutional activity, can be totally detracted. Please note: therefore, we must firstly identify if there are some subjective limitations for the activity performed by our customer.

9 OBJECTIVE type of limitation This type of limitation is referred to the specific nature of the good. In the case of company car, you must qualify the vehicle in relation to the classification contained in the Highway Code and to the identification made by the tax legislation. Normative references: art. 19 bis-1 D.P.R. 633/972 art. 35 paragraph 11 L.D. July 4, 2006, no. 223 Measure of the Revenue Agency of December 6, 2006 Please note : you should always check that the contents of the vehicle registration is congruent with the characteristics of the vehicle and its destination.

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11 Legislative Decree April 30, 1992, no. 285 "Highway Code" art. 47 categories of motor vehicles b) - category M: four-wheel motor vehicles intended to the transport of people; - category M1: vehicles intended to the transport of people, with a maximum of eight seats including the driver; - category M2: vehicles intended to the transport of people, with more than eight seats in addition to the driver and with a minimum mass not exceeding 5 t; - category M3: vehicles intended to the transport of people, with more than eight seats in addition to the driver and with a minimum mass more than 5t; c) - category N: four-wheel motor vehicles intended to the freight transport; - category N1: vehicles intended to the freigth transport, with a minimum mass not exceeding 3,5 t; - category N2: vehicles intended to the freight transport, with a minimum mass more than 3,5 t, but not exceeding 12 t; - category N3: vehicles intended to the freight transport, with a minimum mass more than 12 t;

12 Info: - D.P.R. October 26, 1972, no. 633 art. 19-bis1 Exclusion or reduction of detraction for certain goods and services ( ) c) The tax on the purchase or on the import of motor vehicles, other than those referred to in point (f) (private use motorcycles with engine displacement exceeding 350cc) of the annexed table B, can be detracted by 40 % if vehicles are not exclusively used in the exercise of business, professional and artistic activities. This provision does not apply, however, to agents and sales representatives and when these vehicles are the subject of the company s activity. The term road motor vehicles refers to all motor vehicles, other than agricultural or forestry tractors, normally used for the transport of people or goods, with a maximum authorized mass not exceeding kg and with not than more eight seats, excluding the driver; d) The tax on the purchase or on the import of fuels and lubricants intended to aircrafts, pleasure crafts and road motor vehicles, as well as to the performances referred to in the third subparagraph of article 16 and to the performances of security, maintenance and repair service, including transit road of goods, can be detracted in so far as it s allowed to detract the tax on the purchase or on the import of such aircrafts, pleasure crafts and road motor vehicles; ( )

13 Info: - L.D. July,4, 2006, no. 223 Visco-Bersani s Decree art. 35 Anti-avoidance measures ( ) 11. In order to combat the abuses of the tax provisions governing the industrial vehicle sector, by decision of the Director of the Italian Revenue Agency, once the opinion of the Ministry of Transport has been acquired, we identify those vehicles that, regardless of the type-approval, result from adaptations that don t prevent the use for private transport of people. These vehicles must be liable to the vehicles referred to in paragraph 1, letter b) of article 164 of TUIR, in the Presidential Decree no. 917/1986, and to in paragraph 1, letter c) of article 19-bis 1 of the Presidential Decree Republic no. 633/1972.

14 Info: - Revenue Agency Measure December 6, 2006 In accordance with art. 35, paragraph 11, of the decree-law No. 223 July 4, 2006, modified by the law no. 248 August 4, 2008, the vehicles that, regardless of the type-approval, result from adaptations that don t prevent the use for private transport of people are those vehicles that have a code of bodywork F0, four or more seats and a relationship between the engine power (EP), expressed in KW, and the carrying capacity (Cc) of the vehicle, obtained as the difference between the maximum mass (Mm) and the tare (T), expressed in tonnes, equal to or greater than 180, according to the formula below. (Formula to be used for the determination of the reference value) I = {[EP (Kw)]/[Mm - T (t)]} 180 In simple terms, vehicles that undergo a limitation on detraction and on deductibility are all those of category M1 and those of category N1, with a power per tone equal to or greater than 180 KW. Even for these vehicles is expected, however, the detraibilità of VAT and the deductibility of costs described by the following slide.

15 VEHICLES OF CATEGORIES M1 AND N1 OVER WHICH THE LAWS ESTSABLISH FULL VAT DETRACTION Vehicles that are subject to the enterprise s activity. For example: vehicles subject to the activities of car dealers and car manufacturers This category also includes those vehicles intended to give a demonstration that helps to convince a customer, as well as the replacement cars given to the customer, when his vehicle is being repaired. Vehicles used exclusively as a capital good in the exercise of business, professional and artistic activities. This category concerns those vehicles that are necessary for the business activity: for example, the cars used by companies that make rental, leasing or taxi service; the cars used by driving schools and funeral services; the cars used for maintenance on the motorways (C.M. no. 48/E 1998 and circular ASSONIME no February 2008). Vehicles used by agents and sales representatives including those involved in corporate form Benefit cars Business use cars are considered as a benefit in the case the employer may also use it for personal use, as well as for business use (dual purpose cars). Employer and employee may establish the payment of a fee for the personal use of the car. In this case, the VAT paid on the purchase of the car can be totally detracted.

16 Info: - VAT - D.P.R. October 26, 1972, no art. 19-bis1 The rules on Vat detraction can be applied to purchases, to import vehicles, to buy a car for rental or financial leasing, to acquire replacement components, fuels and lubricants, to buy services such as tolls, maintenance and safety. Vehicles a) assets subject to the business activity - b) capital goods Agents and sales representatives 100% 100% Mixed-use car (people, goods) (business, professional and artistic activities) Vehicles made available to employees Vehicles made available to employees and administrators 40% 100% If the use is against payment 40%

17 CARS ASSIGNED TO EMPLOYEES AND ADMINISTRATORS MIXED-USE it s an additional benefit in kind (fringe benefit ). The fringe benefit will be taxed to the employee and administrator for tax purposes and social security. The value of fringe benefit is excluded from VAT pursuant to the art. 3 paragraph 6 DPR 633/1972. In these cases, the VAT paid on the purchase and on the cost-in-use of a car (fuel, repair services, tolls etc.) can detracted by 40% MIXED-USE THAT PROVIDES FOR THE PAYMENT OF A FEE BY THE EMPLOYEE In these cases, the Revenue Agency allows to detract by 100% the VAT paid on the purchase and on the cost-in-use of a car (fuel, repair services, tolls, etc.). The charge and the payment of the sales revenues to the administrator for the mixed-use cars doesn t allow to detract by 100% the VAT paid on the purchase and on the cost-in-use of the vehicle. The detraction of 100% is a benefit awarded only to the employees; for the administrators, the detractions is always of 40%. The value of private use is determined according to the art. 51 of TUIR in a flat rate of 30% of the cost deductible from the ACI rates on conventional distance of km. (Update A.C.I. Tables published for the year 2013 on ordinary supplement to the Official Journal No. 297, by Friday, December 21, 2012) C.M of 2012.

18 Info: - AUTOMOTIVE FUEL Fuel distributors can t issue invoices for fuels (although they can do it for lubricants and other products). It follows that the IVA detraction, to the extent possible, can only occur: On the base of the fuel card, filled in accordance with rules On the base of the bank statements of purchases, made with credit cards or debit cards On the base of the invoices sent by the oil companies, against the use of fuel card The taxpayer can use, at his discretion, both fuel card and credit card, but the use of fuel card is incompatible with the use of credit or debit cards and vice versa for all the company cars. Very briefly, if you use the fuel card you can t use your credit card. It s not allowed the simultaneous use of the two methods (Circular no. 42/E of November 9, 2012).

19 The VAT rule applicable on the handing over of used vehicles How is VAT applied on the handing over of used vehicles? The art. 13 paragraph 5 of DPR 633/1972 provides that, to determine the VAT tax basis, the percentage of detraction on the purchase is applied on the agreed price for the assignation of the car. Starting from the amount obtained, you can calculate the VAT according to the percentage in force (now 22%). For example: price of assignation (VAT included), vehicle was purchased in 2010 and has been applied a detraction of 40% = the payment, exclusive of VAT, is equal to X = 60% X + 48,8 %X ( 40% + VAT at 22%), that is x 100: 108,8 = of which are subject to VAT at 22% for a total of 4.880; 60% of is the payment exclusive of VAT and is equal to The invoice must be issued for , of which 6000 are exlcuded from VAT, 880 of VAT and 4000 of VAT tax basis. The same rule is applied on the assignation of the lease contracts before they expire. For VAT purposes, the assignation of the lease contract constitutes a supply of services; the payment of the assignation of the contract constitutes, instead, a contingent asset taxable with regards to income taxation. 1ST HANDING OVER

20 Info: HANDING OVER OF VEHICLES PURCHASED WITH TRADE-IN BY DEALERS The law no. 388/2000, art. 30 paragraph 6, established that, against a trade-in on the purchase of a car, the dealer could apply the margin scheme required for the used goods dealers. The tax break was motivated by the fact that the percentage of VAT detraction was really little or nothing (10-15 %) and the requirements issued by the European Union were respected to apply this tax break. With the increase of the percentage of VAT detraction to 40%, now these requirements are no longer respected and, therefore, the dealer can t apply the margin scheme to the resale of used cars, as confirmed by the Revenue Agency with circular no. 8, point 6.2 of March 13, 2009 and by the sentence of 19 July, 2012, EU Court of Justice. The margin scheme continues to be applied on the resale of used cars at 15% and 10 % (see instructions attached to the form of annual statement of VAT in the appendix, section user goods ). Handing over of used goods

21 DETRACTIONS COMPARED Let s compare the saving, in terms of IRES and IRAP taxes, for a capital company in consideration of its activity, supposing to buy a vehicle whose payment is equal to VAT included (tax base , VAT 22% 6.600) Price (VAT included) Vehicles exclusively used as capital goods Agents and sales representatives Employees Mixeduse, charged/invoiced and paid Art. 19 Bis 1 Business, artistic and professional activities - Vehicles not considered as capital goods VAT Detraction 100% 100% 100% 40% VAT detraction Cost accounting to be divided in 5 years: * tax base and nondetracted VAT Amount of deductible % from business income Maximum price deductible to be divided in 5 years: Saving on IRES tax aliquot 27,5 % Saving on IRAP tax aliquot 3.9 % * 100% 80% of ,84 70% 20% of , , , , , ,44

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23 Info: - Limitations on deduction of expenses and other negative components relating to certain motor vehicles used in the exercise of business, artistic and professional activities IRES and/or Irpef D.P.R. December 22, 1986, no art. 164 TUIR

24 IRES and IRPEF art. 164 TUIR Art. 164 establishes two types of limitation: First limitation It establishes the maximum amount of deductibility of the purchase price of the vehicle (both ownership or leasing) Second limitation It establishes the deductibility rate according to the 100% - 80% - 70% 20% use It s allowed the full deductibility for the vehicles not expressly identified by the standard, in respect of the principio di inerenza (relationship between use and exercise of business, artistic and professional activity)

25 Info: - FULL DEDUCTIBILITY FROM THE INCOME The expenses and other costs related to motor vehicles, motorcaravans, mopeds and motorcycles used in the exercise of business, artistic and professional activities, without economic limits, are fully deductible, on the condition that: 100% NO price ceiling Used exclusively as capital goods (and available for public use) CAPITAL GOODS They are the goods which may be put to repeated use, without whom the activity can t be exercised. For example: cars used by the leasing companies or rental companies, by the driving schools or by the funeral services, as established by the tax authorities with the Circ. no. 37/E of February 13, 1997 AVAILABLE FOR PUBLIC USE Public use is approved through a public administration act. For example, the vehicles used by the Community licence for the exercise of taxi service take part in this category.

26 ( ) some general rules The provisions are applied independently from legal title under which the car can be used (ownership, leasing, rental). -The purchase price of the vehicle is not totally deducted at the time of purchase, but it s divided in four or five exercises according to the logic of depreciation (non-deductible VAT is included in the purchase price) -The handing over of the vehicle gives rise to a capital gain or to a capital loss, according as the purchase price is higher or lower than the book value. With the Circ. no. 19/E of May 17, 2000, the Financial Administration has clarified that the pecuniary sanctions, applied by the UE or by other organisms, are not deductible because these sanctions are not incident to the business activity. In the case of cars that have a deductibility limitation, the evaluation of the ceiling of 5% of the maintenance costs (referred to in Article 102, paragraph 6, TIUR Tax Code) must be made on the significant cost, as specified by the Financial Administration, with Circ. no. 48/E, The costs of maintenance and repair exceeding the limit of 5% are deductible in straight line basis over the 5 following businesses.

27 Info: - AGENTS AND SALES REPRESENTATIVES PARTIAL DEDUCTIBILITY FROM INCOME Indipendently from the legal person s status that exercises the agent or sale representative activity, costs are partially deductible from income, in compliance with the following expenditure limitations (art. 164, paragraph I, lett. B, TUIR) 80% ,84 Car costs (insurance, safety, washing, tolls, fuel, lubricants, property tax) are 80% deductible and ceiling it s not provided. This concessionary treatment has been recognized by the Revenue Agency even for insurance intermediaries and for financial advisers.

28 BUSINESS, ARTISTIC AND PROFESSIANL ACTIVITIES PARTIAL DEDUCTIBILITY FROM INCOME Indipendently from the legal person s status that exercises these activities (sole proprietorship, trade association or corporation) costs are partially deductible from income, in compliance with the following expenditure limitations (art. 164, paragraph I, lett. B, TUIR) 20% ,99 In the case of sole proprietorship, the partial deductibility is allowed to a single vehicle (a professional that uses both car and motorcycle can t deduct the expenses of both vehicles); in the case of corporations, deductibility is allowed to a single vehicle for each member.

29 Info: - VEHICLES ASSIGNED TO EMPLOYEE DEDUCTIBILITY FROM INCOME BUSINESS USES: in this case, there is no a formal procedure for the assignment; the car remains in the legal availability of the company, discounting rules (in other words, it s deductible by 20%) within economic limitation provisions depending on the acquisition and on the types of means of transport. Business use car is not included in the employee s earnings. MIXED-USE : in this case, the employer may also use the car for personal use. For the grantor company, the cost is deductible by 70% without economic limitations. In consideration of this more balanced treatment, a taxable fringe benefit is charged on employee, as provided by art. 51 of TUIR. Mixed-use can be free or in payment. In this latter case, it will be issued an invoice and the payment will be determined according to the art. 51 of TUIR. The rates published by ACI are already inclusive of VAT.

30 VEHICLES ASSIGNED TO EMPLOYEE MIXED-USE 70% NO ceiling COMPANY appropriate documentation attesting the mixed-use such as, for example, a specific clause in the employment contract; mixed-use must be realized within the most part of the tax period Departmental Circular no. 48/E, 1998: when the use of the vehicle by the employee is at least equal to 50% plus one-half of the days composing the tax period taken into account ( leap year). EMPLOYEE Taxable fringe benefit is provided With the term fringe benefit we intend the benefit in kind assigned to a specific subject in consideration of its position and its importance within the business activity. Employees receive remuneration through the right to use a specific good or service, and not by payment in cash.

31 Info: - VEHICLES ASSIGNED TO ADMINISTRATOR MIXED-USE 20% ,99 The purchase price of vehicles assigned in mixed-use to administrators, both free of charge (fringe benefit) and in payment, are 20% deductible complying with the economic limitation of ,99. The costs of using a car are 20% deductible. According to the art. 95 of TUIR, the company deducts the car costs within the limits of fringe benefit; the expenses ratio exceeding this limit is deductible by 20%. Departmental Circular no. 25 and n. 36/2012: for simplification purposes, the taxable value of tax and social security benefits, conferred to the administrator for the personal use of the car, is determined depending on the art. 51 of TUIR: the value of using a car for personal use is equal to the ACI price per kilometer for a conventional distance of 4500 km briefed a year. These rules are applied even for term-contract workers.

32 Special cases Business purpose Demonstration purpose Advertising purpose The vehicle must be effectively used to satisfy the need to have administrative mobile offices, such as for example at exhibitions and fairs. Therefore, the vehicle is not just a simple means of transport, but it s characterized by specific equipment (computer, fax machine, cell phones, classifiers, etc.) This case involves those vehicles that are used for example by car dealers, intended anyway to be sold. In this case, VAT can be detracted, as long as these vehicles are reflected in a contractual obligation with regard to the grantor. These vehicles are characterized by the presence of outdoor advertisements and/or corporate brands. In these case, In these cases, the taxpayer is not allowed the total deduction of the ineherent costs.

33 Comparison

34 Info: c SUMMARY Info: carla.brighenti@studiobrighentirappini.com - davidedegiorgiwork@gmail.com

35 SUMMARY

36 COMPARISON OF DEDUCTIONS Let s compare the examined cases, supposing the purchase of a car whose cost is (year 2013) Vehicles exclusively used as capital goods Agents and sales representatives Employees Mixeduse, charged/invoiced and paid Art. 19 Bis 1 Business, artistic and professional activities Payment % of deduction 100% VAT 80% of ,84 70% VAT assessment 20% of ,99 assessment base base Cost accounting to be divided in 5 years: Maximum price deductible (25% a year) , ,2 Year 2013* , ,90/903,8* Year , ,8 Year , ,8 Year , ,8 Year , ,90 * For businesses, but not for professionals, the depreciation of the first and the last year is calculated at 50%. As a result, the depreciation period for professionals is four years, instead of five, and depreciation is calculated on a straight-line basis.

37 Car leasing Accrual: The total cost of the contract (excluding the repurchase price) must be divided by accrual in four years regardless of the duration of the contract. Example of leasing contract with effect from July 1, 2013, and duration of 36 months: you must subdivide the total cost of the contract, including maxicanone (the large initial payment) and non-detracted VAT, excluding only the repurchase price: in four years, from July 1, 2013 to June 30, 2017, total amount: 1430 days, so: (184 dd on 1430 dd in 2013 ) (365 dd in 2014 and in 2015) (366 in 2016) (83 dd in 2017) The percentages of deductibility costs, provided for ownership, are also applied to leasing contracts along with maximum deduction limit: Vehicles as capital goods Sales representatives mixed-use employees Businesses and professionals 100% no ceiling 80 % ceiling ,84 70 % no ceiling 20% ceiling ,99 Ratio of tax deductibility: the total cost of the contract must be compared to the maximum deduction limit allowed by art. 164 of TUIR, as reported above, according to the formula: Ratio of deductibility = maximum allowable cost incurred by grantor, including non-detracted VAT

38 Info: - COMPARISON It s always useful to make a comparison on the results that have an impact on the enterprise s tax accounts, with the implementation of the limitations on the deductibility of costs incurred for the use of the car in the conduct of its business. Let s suppose to acquire a leased M1 vehicle, whose cost is , plus VAT, with a leasing contract lasting 36 months, from July 1, 2013, to June 30, 2016, maxicanone 2.600, 36 monthly installments of 676,78 each plus VAT, the first payment on August 1, 2013, total cost of the contract 26964,08, in addition to the repurchase price 2.600: MAXIMUM DEDCUTIBLE AMOUNT TO SUBDIVIDE BY ACCRUAL IN DAYS