This summer, changes were made again in relation to deduction rights for cars used for business purposes. Starting from 1 July 2012, these are subject to a 50% deduction limit not only for “fuel expenses for motorized vehicles which are exclusively used for transportation of people,” but also for “expenses related to motorized road vehicles which are not exclusively used for business purposes.”
A short case study will help us better understand these changes. Let’s suppose we have a company that delivers food products and owns, on 1 July 2012 , a vehicle with 2+1 seats, below 3.500 Kg, especially built for goods distribution and equipped with a cooling system. This vehicle is used for goods transportation, however the user (driver) travels some extra kilometers for personal purposes after working hours and the related cost for the fuel consumption is withheld from his paycheck.
Can the fuel expenses and any other expenses (insurance, repairs) be fully deductible for this vehicle, as was possible before 1 July?
The tax authorities’ approach, as demonstrated by memos signed by the taxpayers assistance services of the National Agency for Fiscal Administration (ANAF), is the following: ”It is to be considered that a vehicle is not exclusively used for business purposes, in a situation when, as well as being used for business purposes, the vehicle is also used occasionally or on a regular basis for personal purposes.”
The new provisions do not allow deviations or interpretations. On the other hand, if these vehicles were to be used only for goods delivery by an agent or sales agent, then they would fall under the EXCEPTIONS, the related expenses becoming fully deductible. In such instances, there is no longer any question that occasional use of the vehicle for personal purposes triggers a reconsideration of its tax treatment and a limitation of the deductibility of the expenses to 50%.
Romana Schuster, Senior Manager, Taxation services