January 24, 2024
Using your personal car for business: What costs can you deduct?
Many entrepreneurs have a personal car that they also use for business purposes. Perhaps this is also your situation. All the rules regarding cars and entrepreneurship are always a bit complicated. In this article, we will explain how the VAT rules work for using your personal car for business purposes.
Are car expenses deductible from your profit?
First of all, it is useful to know that car expenses such as maintenance costs and fuel costs are not deductible from the profit of your business. However, you are allowed to deduct an amount per business kilometer from your profit each year. The mileage reimbursement changes regularly:
2024: 23 cents per business kilometer
2023: 21 cents per business kilometer
2022: 19 cents per business kilometer
To be eligible for the mileage reimbursement, you will need a proper mileage log that meets the required criteria.
What about VAT on car expenses?
VAT is only deductible for business kilometers. The main rule is that you deduct all VAT on all car costs (including private costs). You then make an adjustment for your private use at year-end. You can make this correction in 2 ways, depending on whether or not you have mileage registration.
- You do have mileage registration: Private km / total km * Refund VAT on all car costs
For this method you have to look at how much of your car you used privately. To do this, you must keep a trip registration throughout the year. Then you make the following calculation: (Private km / total km) * VAT on all car costs = amount of VAT to be repaid.
Please note, for VAT purposes, kilometers are only business-related if you have incurred them for taxable turnover. So if you have driven kilometers to the office for exempt turnover, these kilometers are not business-related.
We will give an example to clarify this further:
You have reclaimed 800 euros in VAT on all car costs in one year.
Your trip registration shows that you drove a total of 40,000 kilometers in that year, of which 25,000 kilometers were for business purposes and 15,000 kilometers were private.
(Private km / total km) * VAT on all car costs = (15,000 / 40,000) * €800 = 300 euros of VAT to be refunded.
- You have no km registration: Refund a percentage of the catalog value
If you have not kept a mileage registration, you can use this method. The question now is whether you reclaimed VAT when purchasing your car. No VAT reclaimed upon purchase: refund 1.5% of the list price.
The VAT correction is never higher than the VAT you deducted in that year. VAT reclaimed upon purchase: refund 2.7% of the list price.The VAT correction is never higher than that deducted in that year + 20% of the VAT deducted upon purchase. This applies for 5 years.In both cases, if you buy a car exactly halfway through the year, for example, you only have to pay half of this correction.You can easily calculate the catalog value of the car with this link
We'll give you another example:
Suppose you have reclaimed €800 VAT on all car costs in the year 2023. You have not kept a mileage registration. You bought a car in 2020 with a list price of €40,000, including VAT and BPM. You did not reclaim the VAT when you purchased the car.
In this case, the VAT correction to be refunded is 1.5% of the list price, which is 1.5% * €40,000 = 600 euros. The correction for the VAT to be repaid is lower than the total VAT reclaimed in 2023. So the correction is €600 VAT to be refunded.
When you use your private car for business purposes, you can always charge 21 cents (for the year 2023) per kilometer. In addition, you can also deduct part of the VAT on car costs in one of the two ways mentioned above. The Tax Authorities also have a handy calculation tool to calculate the VAT deduction for your car. You can find this here.
