As a freelancer you often need a car for your company. To visit customers, to deliver products or to work on location. But what about the tax rules and the use of a car for your company? The information below is for a car of the company that does not drive private. You must keep a correct mileage registration to show that there is no private driving in the company car. As of 1 January 2012, owners of a delivery van can declare that they will only drive the business car. Because of this statement , you no longer need to keep track of a trip registration.
The following regulations only apply if you have a business car that is not used privately. If you also have a private car, there are a number of other schemes.
There is a company car if the car is part of your company’s capital. The type of car, passenger car or delivery van is not important here. Even if you borrow money for the purchase of the car. In principle, all costs of the car and its use can then be counted as operating costs.
VAT refund on purchase
When purchasing a car, the VAT can therefore be reclaimed immediately if the car is registered at the company. If you buy a used vehicle from a garage, the VAT is also deductible unless it is a so-called “margin car” or you take over a car from a private individual.
Bring your own (private) car into your company
If you start your business you have the opportunity to bring your private car into the company. You then include the value of the car in the initial balance of your company. The value depends on various things such as age, mileage, damage and any accessories. Make a specification of this and keep it in your bookkeeping. The VAT that you paid privately on purchase of the car is not deductible as with purchase for the company, on the other hand you may use the value including the VAT in the depreciation.
Overview and deductions for a company car:
Lease costs company car
If you have a lease company car, all costs you pay for this are deductible from your profit. A lease amount is divided into lease costs and the VAT on this. You must enter this amount separately in your accounts. The value of the car may not be on the balance sheet, since it is not your car, but the leasing company’s property. If you borrow money for the purchase, it is your own car and therefore entrepreneurial. The bank debt must also be included in your balance sheet.
Motor vehicle tax
For every car, whether you use it or not, motor vehicle tax has to be paid. There are different rates for passenger cars, delivery vans and trucks. With a company car, this amount can be booked as car expenses and immediately deductible from your profit. Please note: the exemption for very efficient cars will expire on 1 January 2014 for both new and existing passenger cars. From 1 January 2014 all motor vehicles of 40 years and older are exempt from motor vehicle tax.
BPM (Tax on Passenger Cars and Motorcycles)
As an entrepreneur you get to deal with BPM when buying a car. For vehicles that do not have a gray license plate, the amount is included in the value of the car. The BPM is not directly deductible, you settle this with the annual depreciation (deductible). For a number of cars (gray license plate) is an exemption for paying BPM. A number of conditions must be met here:
- You must be an entrepreneur for sales tax and have a VAT number
- The delivery van is registered in your name or in the name of the legal entity (company)
- The delivery van must comply with the regulations and dimensions of a gray license plate
- You must use the commercial vehicle for business purposes (more than 10% of the mileage must be business).
- Please note: if you as an entrepreneur no longer use the company car by terminating the company or by selling the car, you still have to pay (a part of) the BPM unless the car is older than 5 years. You have to file a declaration yourself.
Every car must be insured at least for liability. The costs of this insurance can be booked in full as expenses and thus deductible from your profit. No VAT is applicable in insurance premiums.
Depreciation company car
Cars quickly lose their original value. If your car is a company car, you can book the depreciation as car expenses. With a company car you take the price (excluding VAT) of the car, including any installation costs of equipment, furnishing, etc. You can not deduct the VAT, you have already settled this with the purchase. Depreciation is usually done via a linear calculation. This means that you basically share the difference between purchase value and residual value over 5 years and book this as depreciation. The depreciation percentage may never exceed 20% of the purchase value per year. If you have not owned the car throughout the year, you will divide the depreciation by 12 and multiply this by the actual number of months.
Petrol costs, maintenance costs and other company car costs
All costs you incur for fuel, maintenance, parking costs, parking permit and repair are immediately deductible from the profits of a company car. You deduct the VAT on this directly from the sales tax return as you do with the purchase of materials.
Fines and assessment of parking tax
Fines for speeding, violations etc. are never deductible. This is sometimes different for parking. If you receive a ticket because you park somewhere where that is forbidden, it will not be deductible. If you are standing at a parking meter and are back late, you will almost always receive an additional parking tax. This is not a violation but a tax and these costs are deductible.