Reaching distant locations quickly is essential during a business trip. Especially when planning a work trip to Sardinia, having your own vehicle can lead to significant savings in both time and money. But what happens to car-related expenses during a business trip? Can car rental costs be deducted? Today we want to clarify this topic.
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Car rental cost deductibility during business trips
When renting a car for a short period, the cost is an aspect that should not be underestimated. In general, the deductibility of expenses and VAT recovery when using a rental car for work has decreased significantly over the years, mainly due to abuses that occurred in the past. Moreover, tax regulations in this area are complex, especially because of the different accounting treatment of costs (deductible at 20%) and VAT (recoverable at 40%).
First of all, it is necessary to distinguish between companies and professionals for whom the car is considered a business asset (such as taxis and driving schools) and those for whom the car is not a business asset.
When the car is not considered a business asset—therefore not essential for work—the following rules apply:
20% cost deductibility, up to a maximum annual limit of €3,615.20
40% VAT deductibility
For example, if a company rents a car worth €4,000.00 + 22% VAT (€880.00), it can:
deduct €800.00 (20% of €4,000.00)
recover €352.00 of VAT (40% of €880.00)
If, instead, the car is classified as a business asset for the company or professional, tax regulations allow 100% cost deductibility and 100% VAT deductibility, with no spending limits.
When the rental car is assigned to an employee, the deductible percentage for the company rises to 70%.
Car rental cost deductibility for agents and sales representatives
For financial promoters, sales representatives and agents, different deductibility limits apply:
20% deductibility, with a maximum threshold of €5,164.57
40% VAT deductibility
This update was introduced by the 2017 Stability Law, which aligned the rules for short-term car rentals. Workers in this category can reach a maximum deductibility limit of €25,822.84, compared to the €18,07.99 limit set for companies and professionals.
What happens with additional services?
If the rental includes additional services, different rules apply to both cost deductibility and VAT recovery. According to tax regulations:
the same deductibility percentage applies: 20% for companies and professionals, and 80% for representatives and agents;
there is no spending limit for VAT deductibility.
Looking for a car rental service in Olbia? Ellepi is located directly at the airport: discover our fleet and book in advance the perfect vehicle for your business trip!
