What are the taxes we pay when we own a car?

Many of you probably know exactly which taxes you paid when you bought your car, and how much, as well as the ones you keep paying throughout the life of the vehicle you own. There are also people who pay little attention to this matter, but above all young drivers who are close to buying their first vehicle and this topic worries them, so let’s make clear which taxes we have to pay for our vehicles.

Vehicle Mechanical Traction Tax (IVTM)

The technical name of this tax is the long one that appears in the title, Vehicle Mechanical Traction Tax, although it is popularly known as the Circulation Tax. This is a tax we have to pay that allows us to drive on any public road. If we don’t pay it, the vehicle cannot be driven and, in that case, if we ignore the council’s requests for payment we may face fines exceeding 500 euros, seizure of our bank account and even seizure of the vehicle itself. On top of that, you won’t be able to sell the vehicle, since the DGT will ask for the payment receipt when transferring ownership.

That is why it is better to avoid strange experiments and, however small the amount to be paid, to pay it without hesitation. In fact, when we acquire a new vehicle, we pay it for the first time when we register our new purchase, prorating the quarters remaining in the year, since you will pay the full year if you do it in March, for example (as it is the first quarter), whereas if you do it in April you will pay for the remaining three quarters of the year. If the car we are buying is second-hand, the vehicle’s owner on 1 January is the one who must pay the full amount, regardless of whether they sell it later, for example in July.

The Circulation Tax must be paid to the council of the municipality where our vehicle is registered, and the amount differs from one council to another, since although the amount is set by the Local Government Finance Act, the councils themselves can make modifications within maximum and minimum limits. The amount is calculated on the basis of the vehicle’s fiscal horsepower (CVF), so not all vehicles pay the same either. There are also others that are exempt from paying it, such as ambulances, vehicles adapted for people with reduced mobility, vehicles with diplomatic plates, agricultural vehicles, public passenger transport vehicles and collector’s vehicles.

Special Tax on Certain Means of Transport

This long name, Special Tax on Certain Means of Transport, is known by everyone under a much shorter and easier-to-remember name: Registration Tax. In our country this tax is paid only once during the useful life of the car, that is, when we buy a new vehicle or when we import a vehicle that is going to be registered in Spain. The amount for the base of this tax is calculated using a table provided by the Ministry of Finance, which depends on the CO2 emission level of the car we have bought, as follows:

• 0% tax: for emissions equal to or below 120 g/km.
• 4.75% tax: for emissions between 120 g/km and 160 g/km.
• 9.75% tax: for emissions between 160 g/km and 200 g/km.
• 14.75% tax: for emissions equal to or greater than 200 g/km.

But, just as with the previous tax, where the councils make additional modifications, for the Registration Tax the autonomous communities themselves make adjustments that can increase our amount by up to 15%. However, those who belong to certain groups can benefit from reductions in this tax, such as a 50% reduction for large families, a 30% reduction for vehicles used as a home, or exemptions if the vehicle is a taxi, a driving school car or adapted for disabled people.

Value Added Tax (VAT)

The Value Added Tax is undoubtedly the tax that we all know best, and it represents a large amount relative to the value of the car, since, as you well know, when we buy a vehicle the transaction is subject to the general rate, which is 21%. However, people with reduced mobility or disabilities can benefit from the super-reduced VAT rate of 4%.

Bear in mind that this tax applies inexorably to all vehicles, but if it is a second-hand vehicle, there are a couple of details we need to keep in mind:

• If the vehicle is being sold by a company, by a self-employed person who trades in vehicles, or if VAT was deducted when the vehicle was purchased, 21% VAT must be paid.
• If the second-hand vehicle is sold by a private individual, VAT does not apply to the transaction, but it will be subject to the Transfer Tax (ITP), which we will discuss below.

Transfer Tax (ITP)

As I mentioned earlier, the Transfer Tax (ITP) only applies when a private individual sells their vehicle, so our autonomous community will charge us an amount for carrying out the transaction, which depending on where we live can vary between 4% and 8%. Some autonomous communities do not even charge it if the vehicle is more than 10 years old and worth less than a set amount.

To calculate how much we have to pay for this tax, we need to look at the tables that the Ministry of Finance publishes every year, which deduct a depreciation percentage depending on the age of the car relative to its value when it was new, in order to calculate its current price. To this we must add the percentage that each autonomous community sets to find out how much we have to pay for this tax.

However, we must bear in mind that if the buyer and seller agree on a higher price than the one calculated by the table, the tax is calculated on this price, so the final amount will be higher.