Are you considering whether to drive your car privately or register it as a business asset? This is a common question for many entrepreneurs. It’s often assumed that putting the car on the company’s books is automatically beneficial. However, that’s not always the case. In this article, I’ll explain the rules for company cars, what you should take into account, and when it’s advantageous to register the car as a business asset.
When it comes to a company car, the discussion almost always involves "bijtelling." So, what is bijtelling? If you have a company car, you’re allowed to deduct all expenses related to the car from your profits. This is beneficial, as it lowers your taxable profit and therefore your tax liability. However, you may also want to use the car privately. The law considers the ability to use the company car for private purposes, which means you don’t incur personal car expenses, as a form of "benefit in kind." This benefit is taxed based on the bijtelling. Essentially, bijtelling is an amount that is added to your income, leading to tax on the private use of the car.
Now that we know what bijtelling is, the question is, how much will it be? The amount of bijtelling is based on the car’s value. Generally, bijtelling is 22% of the car’s list price. This means that 22% of the car's list price is added to your annual income.
There are a few exceptions to this. The most significant exceptions are electric cars. To encourage the use of electric vehicles, a lower bijtelling rate applies, making it more attractive from a tax perspective. However, this incentive is gradually being reduced.
Another exception is the "Youngtimer" rule, which applies to cars over 15 years old. For these cars, bijtelling is calculated at 35% of the current market value rather than the original list price. Since the value is lower, the bijtelling is also lower. This recognises that the private benefit of an older car is less than that of a new car.
If your car is registered as a business asset, which costs are deductible? One advantage is that you can deduct all car-related expenses, even for holiday trips. This includes:
Fuel
- Insurance
- Road tax
- Parking costs
- Maintenance
- Depreciation
Can you still deduct car costs if the car is not a business asset? This question is relevant when deciding whether it’s more beneficial to keep the ca as a business or private asset. If the car is not registered as a business asset, you generally cannot deduct car costs from your profit. However, you may deduct €0.23 per kilometre for business use. This is a reimbursement for using your own car for business purposes.
Which is ultimately more beneficial, private or business use? This isn’t always an easy question to answer, and we can calculate it for you. Roughly, you can use the following calculation:
If car expenses + depreciation - bijtelling > business kilometres driven * €0.23, then it’s more advantageous to keep the car as a business asset. Otherwise, it may be better to keep it as a private asset.
The calculation of whether it’s advantageous to register a car as a business asset is similar for both sole traders and limited companies. However, bijtelling works slightly differently. For a limited company, the director-major shareholder (DGA) receives a salary. If the DGA uses the company car privately, bijtelling is added to the salary, and income tax is paid monthly as part of payroll tax.
For a sole trader, if you use the car for business, bijtelling is calculated during the annual income tax return, with the tax paid at the end of the year.
Another significant difference is when you can decide to classify the car as a business asset. For sole traders, this choice is generally made with the first income tax return after purchasing the car (with a few specific exceptions). In a limited company, you can transfer the car between the DGA and the company at any time. This flexibility can be useful, for example, when the car turns 15 years old and qualifies as a Youngtimer.
Is there bijtelling for VAT if you have a company car? Unfortunately, bijtelling rules also apply to VAT when the car is a business asset. If the car is a business asset, you can generally reclaim the VAT on car expenses. However, a correction is applied because of private use. Explaining this VAT regulation in detail is beyond the scope of this article. However, it’s important to know that for profit calculations, you can choose to keep the car as a business asset but not for VAT, and vice versa.
The conclusion is clear: whether it’s advantageous to register a car as a business asset depends on your specific situation. Always seek tax advice before purchasing a car to ensure you make the right choice.
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