- Businesses leasing passenger cars with less than nine seats for non-sales or service purposes must not declare input tax deductions in the following situations:
- Ownership of the leased vehicle is transferred to the lessee upon lease expiration.
- The lessee has the option to purchase the leased vehicle during the lease period at a price significantly lower than its fair market value on the exercise date.
- The lease period reaches 3/4 of the economic life of the leased vehicle.
- The present value of the minimum lease payments on the lease start date is 90% of the fair market value of the leased vehicle.
- Other sufficient evidence shows that the risks and rewards associated with the leased vehicle have been transferred.
- The tax bureau explains that whether input tax on lease payments for passenger cars with less than nine seats can be deducted depends on whether the lease contract qualifies as an installment sale. For example, if a company leases a vehicle for three years and transfers ownership at the end of the lease, the input tax cannot be deducted.
- Businesses leasing passenger cars not meeting the above criteria, used for business and related activities, can deduct input tax on lease payments if the vehicles are not restricted to certain employees and are managed collectively.
- Businesses mistakenly declaring input tax deductions on installment sale leases must voluntarily report and pay the tax with interest before being investigated to avoid penalties under tax laws.
Source: mof.gov.tw
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
