As an entrepreneur or self-employed person, the choice between private or company car often comes up. A business car can be both convenient and fiscally advantageous. But before you tie the knot, there are a few important things to consider carefully. In this article, we will discuss the most important points so that you can make the right decision with confidence.
What does a company car mean?
A company car means that your company owns the car and makes it available to you as an entrepreneur or employee. All costs associated with the car – think maintenance, fuel, insurance and depreciation – are paid by the company. This is fiscally advantageous because these costs reduce your company’s profits. Do you use the car privately? Then the tax authorities see this as an extra benefit. This means that in some cases you will have to deal with additional taxable income for private use, which increases your income and thus incurs more tax. Sometimes you have no choice between car private or company. If you use the car privately for more than 90%, it must be classified as private assets. If, on the other hand, you use the car for more than 90% business use, the car falls under compulsory business assets.
What is addition car?
Additional taxable benefit is the amount added to your income when you also use the business car privately for more than 500 kilometres per year. The percentage of the addition car depends on the CO2 emissions and the catalogue value of the car. For fully electric cars in 2024, the addition car rate is 16% up to a list value of €30,000, and above that, 22% applies. For petrol and diesel cars, 22% applies by default.
Company car addition: how does it work?
If you pay an additional taxable benefit, you may also use the business car privately. However, in case of too much private use, the tax authorities may adjust the additional taxable benefit to better reflect the actual private use. It is therefore wise to avoid prolonged recreational trips with the business car.
Do you drive less than 500 private kilometres per year? Then you can avoid the additional taxable benefit, provided you keep a comprehensive mileage record.
Additional taxable income car and VAT: What about it?
VAT also plays a role in the additional taxable income car. When you use a business car privately, you have to pay VAT on the private use. This amount is calculated based on a percentage of the additional taxable benefit. Make sure you include this correctly in your VAT return so that you comply with the rules of the Inland Revenue.
Alternative: private car and mileage reimbursement
If the additional expenses are a major expense, it may be more advantageous to keep your car private and receive a mileage allowance for business trips. In 2024, the untaxed mileage allowance will be €0.23 per kilometer. Although this reimbursement does not always cover all costs, it provides an easy way to keep your records organized. This is especially attractive if you do not make many business miles.
We are happy to help you
A business car can be convenient, but using it for private purposes brings additional tax concerns. It is important to keep a close eye on the rules around additional taxable income for the car, VAT, and the distinction between business and private use. Do you use the car privately or on business for a vacation, for example? Then private mileage can affect your tax position. Make sure you know exactly how much additional tax liability you will have to pay and how this will affect your tax return. Our team is ready to help you make the best choice. Simply schedule a no-obligation appointment with one of our specialists.
