This article explains the tax treatment of fuel, maintenance, and repair expenses for a vehicle used in professional activities but not included in the business inventory (registered in the name of a third party). The analysis is based on the advance tax ruling dated May 13, 2024, issued by the Ankara Tax Administration. Purpose and Scope The ruling clarifies two critical questions for self-employed professionals in Türkiye: Can expenses for a vehicle registered to a third party (e.g., a sibling) be deducted for Income Tax purposes? Can the VAT (KDV) on these expenses be offset against the professional’s VAT liability? Case Study: The “Atlas Consulting” Scenario Consider a professional operating as Atlas Consulting. To visit clients, the owner uses a passenger car registered to their sibling. The vehicle is not recorded in the business inventory. Throughout the year, Atlas Consulting receives invoices for fuel, tires, and periodic maintenance in the company’s name. At the end of the period, the taxpayer attempts to deduct these costs and offset the VAT, arguing that the vehicle is “used exclusively for business.” The ruling provides a definitive answer to this scenario. Evaluation Under the Income Tax Law Professional Expenses and the Inventory Requirement According to Article 68 of the Income Tax Law (GVK), certain expenses can be deducted from professional revenue. However, for vehicle-related expenses (fuel, repairs, and depreciation) to be deductible, the ruling emphasizes two legal paths: The vehicle must be rented (via a formal lease agreement), OR The vehicle must be included in the business inventory. The Ruling: Expenses for Non-Inventory Vehicles are Non-Deductible The Ankara Tax Administration concluded that even if the vehicle is effectively used for work, if it is not registered in the business inventory, the following cannot be deducted: Fuel expenses, Maintenance and repair costs, Depreciation (amortisman). Key Takeaway: “Actual use for business” is not sufficient on its own. Inventory registration is the mandatory legal link for tax deductibility. Evaluation Under the Value Added Tax (VAT) Law The Link Between Deductible Expenses and VAT Under Article 29/1 of the VAT Law, taxpayers can generally deduct VAT shown on invoices for goods and services related to their activities. However, there is a crucial restriction in Article 30/d: VAT paid on expenditures that are not accepted as deductible expenses under Income or Corporate Tax Laws cannot be credited/deducted for VAT purposes. The Ruling: No Expense Deduction, No VAT Offset Since the fuel and maintenance costs for a non-inventory vehicle are not accepted as professional expenses for income tax purposes, the ruling states that the VAT on these invoices cannot be deducted either. Critical Point: What Does “Inventory Registration” Mean? The administration’s logic follows a strict chain: No Inventory Record = No Income Tax deduction for vehicle costs. No Income Tax Deduction = No VAT credit (per VAT Law 30/d). Result: The professional bears the full cost plus the VAT as a non-deductible personal expense. Q&A Table: Vehicle Expenses in Türkiye Question Answer Can I deduct fuel for my sibling’s car if I use it for work? No, if the car is not in your business inventory, you cannot deduct fuel costs. Are repair costs for non-inventory cars deductible? No, the ruling clearly states these costs are non-deductible for professionals. How can a professional deduct car expenses? The vehicle must either be officially rented or recorded in the business inventory. What does “including in inventory” mean? It means recording the vehicle as a business asset in the professional’s accounting books. Can I claim depreciation for a car registered to a third party? No; depreciation only applies to assets included in the business inventory. Can I offset VAT if the expense is non-deductible? No; per VAT Law 30/d, if the expense is not deductible for income tax, the VAT is also not deductible. Why is VAT denied in this case? Because the underlying expense is legally rejected for income tax purposes. Can I deduct expenses for every car used for business? Only for those that meet the rental or inventory criteria, subject to certain limits. What if the fuel invoice is in my name? It doesn’t matter; the ruling focuses on the vehicle’s inventory status, not just the name on the invoice. What is the final word from the Ankara Tax Authority? Vehicle costs for cars registered to third parties and not in inventory are fully non-deductible.   Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.