If you are looking to renew your car or increase the number of units for your company’s operation, while seeking to optimize your tax deduction, we invite you to learn in detail how vehicle leasing works, a tool that allows companies to deduct certain expenses associated with assets used in their operation, thus offering an additional benefit in tax matters.
Let’s remember that every payment made, including any expense or investment, must be supported by a tax receipt that complies with the requirements of Article 29-A of the Federal Tax Code. Failure to do so will result in the loss of 30% of the value of each expenditure.
As a legal entity, individual with business or professional activity, you can access some tax deductions, such as: donations (with a cap of 7% of your company’s taxable income), expenses for the purchase of merchandise and everything that is required for the operation of your company, from the lease or purchase of furniture, goods, cars, machinery, technology, among others.
Did You Buy a Vehicle? How Much Can You Deduct?
Regardless of whether you purchased it in cash or on credit, this investment is considered a fixed asset and you can deduct it from your income tax. The deduction is made through depreciation, which in this case is 25% per year. The maximum deductible amount is $175,000.00, if the vehicle costs more, the difference cannot be deducted.
How does depreciation affect ISR? The value of your fixed assets is taken into account when calculating the annual ISR. As the value of the asset decreases (depreciates), so does the ISR calculation. This is reflected in your annual tax return before the SAT.
The value of work vehicles, such as pick-up trucks, is 100% deductible and depreciates at a rate of 25% per year.
But while the tax deductibility of these types of vehicles is attractive, leasing vehicles, trucks or fleets can offer greater tax benefits. Here’s why.
Vehicle Leasing: Tax Benefits for Individuals and Businesses
Leasing is the rental of a good for a determined period of time, with the option to buy it at the end of the contract or renew it. To better understand it and consider its advantages, TIP Mexico, a leading company in leasing and management of transportation equipment with experience and the largest fleet in Mexico, shares with us the different types of leasing and its benefits for both companies and professionals.
Financial leasing: in this scheme, the lessor transfers the right to use an asset to the lessee, in exchange for the payment of rents for a specific period of time. At the end of this period, the lessee has the option to acquire the asset for a predetermined price, known as residual value.
This type of lease not only allows the assets to be recorded as part of the company’s equity, according to income tax and VAT regulations, but also allows the interest paid to be deducted as a financial expense.
Pure lease or leasing: in this scheme, monthly payments are usually significantly lower, since the lessee only pays for the use of the vehicle during the term of the contract, which represents an attractive alternative compared to traditional credits.
In addition, it is important to note that the monthly rental amount may be fully tax deductible, thus offering an additional advantage in terms of tax benefits.
Which One is Better for Me?
While financial leasing only allows us to deduct the actual interest from the amount to be paid, as well as the depreciation of the asset, pure leasing does allow us to deduct the payments in their entirety, helping to reduce the tax burden.
On the other hand, contracting the lease with a lessor that is also a fleet manager can result in a significant optimization of tax deductions. By centralizing all services such as insurance, maintenance management, satellite tracking, legal assistance and telemetry, which are also 100% deductible, this additional advantage provides a solid reason to seriously consider this option when planning your business operations.
Having financial tools in place can be very useful, especially at this time when the economy requires more liquidity to focus on day-to-day activities. It is crucial to have supporters, like TIP Mexico, to discover the benefits of leasing and get your business up and running.
So, this season, forget about the problems and take advantage of the tax deductions offered by leasing.
About TIP Mexico
TIP Mexico is the leading company in transportation leasing, car and fleet management, with 30 years of experience in Mexico and nationwide presence.
It has the largest fleet of towing assets in the country and provides value-added services such as fleet management, maintenance, insurance, legal assistance and satellite tracking, guaranteeing speed, quality and service.
For more information, visit TIP’s website and blog.
