"NEWS October 28, 2016-the discipline of Vat of cars assigned to employees"

Posted by on Oct 28, 2016

Euroconference News

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The rules governing the treatment for Vat to be applied to vehicles assigned to employees are contained in the P.r.decree 633/1972 to articles 3, 13, paragraph 3, and 14; also, interesting clarification on the matter were provided in resolution 6/DPF of February 20, 2008 issued by the tax policy Department of the Ministry of economy and finance.

In particular, article 6 paragraph 3 of P.r.decree 633/1972 provides that relevant services for VAT purposes does not constitute the provision without charge towards employees (other than the personal or family use) of motor vehicles for which purchase, also on the basis of lease contracts, including financial, and hire, deduct the tax has been collected according to the percentage referred to in point c of paragraph 1 of article 19-bis1) then the limited extent at 40%.

As set out in resolution 6/DPF/2008, this regime, consisting of the deduction is limited to forty percent of VAT paid upstream and into irrelevance of private use, is not derogable: in this sense usually lays out clearly the combined provisions of article 19-bis1) (c), and article 3, sixth paragraph) (a) of the Vat Decree. It is not, therefore, permitted the taxpayer to adopt different behavior consisting of the full deduction of the tax on the purchase of the property in question and in the application of VAT, on the basis of normal value, for the private use of the same, but you will have to take this into account when deduction at the time of purchase.

In the case where the vehicle used by the employer in the exercise of company employee is made available for consideration, or by charging a specific agreed consideration specifically to the possibility of using the vehicle for private purposes, in accordance with the recommendations of resolution 6/DPF/2008 these vehicles "are still considered totally used for effecting transactions carried out within the framework of business activity". It follows that, according to general criteria relating to VAT deduction, the tax relating to the purchase of vehicles is considered fully deductible (provided of course there is no limitation on deduction resulting from the transactions exempt or not subject).

The provision of motor vehicles made by the employer in respect of its employees, against a specific consideration, constitutes a supply of services relevant for VAT; regarding the determination of the tax base, article 13, paragraph 3, letter. d), provides that this must be the open market value of the services if you have an amount less than that value, wanting to avoid the distorting effect that could result from the full deduction in the case that had been predicted a minimum not in line with the market.

Article 14, paragraph 3, of the P.r.decree 633/1972 stipulates that for the operations referred to in article 13, paragraph 3, letter. d) must be issued decrees for the identification of normal value: pending the approval of such decrees and in order to simplify and coordination with discipline with respect to taxes on income, normal value shall be determined according to the same parameter which is commensurate with the fringe benefit tax purposes (article 51 paragraph 4, lett. a) of the tax code), or in an amount equal to 30% of the amount corresponding to a conventional distance of 15,000 kilometres calculated on the basis of the cost per kilometer of exercise listed national ACI tables, exclusive of VAT in the same included. Therefore, if the agreed remuneration is less than this amount, the tax base is then formed, instead of the agreed consideration, from the normal value after tax retained amounts to the employee and net of VAT included in the same amount.

Finally, according to the aforementioned resolution 6/DPF/2008 the same conclusions apply even if contractual agreements allow the employee to obtain, subject to payment of a fee, a vehicle model of greater value than those ordinarily assigned.

by Sudha M