When you operate as a freelancer or entrepreneur, you often need a car for your business. Whether you visit clients, deliver goods, or work on-site, managing company car costs correctly helps you save money and avoid tax issues. This guide explains all the major expenses, tax rules, and deductions related to your company vehicle.
1. Using a Company Car for Business Only
If you use your company car strictly for business, you must keep a proper mileage record to prove it. Since 2012, owners of delivery vans can simply declare that they use the vehicle only for work. With this declaration, they no longer need to record every trip.
However, these rules apply only when the car is used for business purposes and not for private travel. If you also own a private car, different regulations may apply.
2. What Counts as a Company Car
A vehicle becomes a company car when it is registered as part of your company’s assets. It does not matter if it is a passenger car or a delivery van. Even if you take out a loan to purchase it, the vehicle still qualifies as business property.
All expenses related to the purchase and use of the car can be listed as operating costs, reducing your taxable profit.
3. VAT Refund on Car Purchase
When you buy a car for your company, you can reclaim the VAT right away. This applies only if the vehicle is registered under the company’s name.
If you buy a used car from a dealer, VAT is usually deductible unless it is a margin car or a vehicle purchased from a private seller. Always check the invoice details before making a claim.
4. Bringing a Private Car into the Business
If you already own a car privately, you can bring it into your company when you start your business. The car’s value becomes part of your company’s opening balance sheet.
This value depends on factors like age, mileage, damage, and added equipment. Keep a written valuation record in your books.
Although you cannot reclaim VAT paid at the time of private purchase, you can include the gross value (with VAT) in your depreciation calculation.
5. Lease Costs for a Company Car
If you lease a company car, all lease payments are deductible from your profit. Each lease invoice includes the lease fee and VAT, which you must record separately in your accounts.
The leased car remains the leasing company’s property, so you cannot include its value in your balance sheet. However, if you buy the car with borrowed funds, it becomes your asset, and the loan should appear as a liability in your company’s books.
6. Motor Vehicle Tax
Every car owner must pay motor vehicle tax, regardless of how often the car is used.
Rates differ for passenger cars, delivery vans, and trucks. You can record this tax as a deductible car expense.
Note: The exemption for highly efficient cars ended in 2014. Now, all vehicles must pay motor vehicle tax unless they are over 40 years old.
7. BPM (Tax on Passenger Cars and Motorcycles)
Entrepreneurs pay BPM when purchasing a car without a gray license plate. The BPM is included in the car’s value and is deductible through annual depreciation.
For cars with a gray license plate, BPM exemptions apply if the following conditions are met:
-
You are VAT-registered as an entrepreneur.
-
The vehicle is in your or your company’s name.
-
The car meets the legal size and usage requirements.
-
At least 10% of total mileage is business-related.
If you stop using the car for business or sell it within five years, you may have to pay part of the BPM back. Always file a declaration if this situation occurs.
8. Insurance Premiums
Every vehicle must have liability insurance. The full insurance cost is deductible from your profit as a business expense. However, insurance premiums are not subject to VAT, so you cannot claim any VAT refund on them.
9. Depreciation of a Company Car
Cars lose value quickly. When the car is registered as a business asset, you can deduct depreciation from your profit.
The depreciation amount is based on the car’s purchase price (excluding VAT), including any added equipment.
Depreciation is usually calculated linearly over five years, with a maximum of 20% per year.
If you own the car for part of a year, calculate the depreciation monthly.
10. Fuel, Maintenance, and Other Costs
Fuel, maintenance, parking fees, and repair costs are fully deductible as company car expenses. You can also reclaim VAT on these expenses during your regular tax return, just like other material purchases.
Fines and Parking Charges
Speeding or traffic fines are not deductible. However, additional parking taxes are sometimes treated differently.
If you receive a fine for illegal parking, it is not deductible. But if you pay a surcharge for exceeding the parking time at a legal spot, that extra fee counts as a taxable parking expense and can be deducted.
