Driving for business purposes and income tax
For income tax, your car counts as entrepreneurial capital. That is why it is mandatory to have a company car if you:
- qualify as an entrepreneur for income tax purposes;
- use the car for your business;
- do not drive more than 500 kilometres per year for private purposes.
Deductible car expenses
If you have a company car, this counts as entrepreneurial capital. That also means that you can deduct the car expenses from your profit. Examples of car expenses are:
- parking costs
- vehicle tax
Are you buying a car especially for your business? Then you may also deduct the purchase cost from your profit. Not all at once, but through depreciation (also known as amortisation). During the years that you use the car, you deduct a portion of the purchase price per year.
How does a company lease car work?
Do you have a company lease car? Depending on the type of lease, you can deduct your costs. With an operational lease, the full monthly lease invoices are deductible. With a financial lease, the instalments also include an amount for repayment. The repayment portion of the instalments is not deductible.
Determine the value of your private car
Do you already have a car and are you going to use it for your business? Then you need to determine the value of your car at the time you switch to business use. You can write off this value. The depreciation and the car expenses listed above are deductible.
Additional tax liability (bijtelling)
Do you use the company car for private purposes as well? Then you must add an amount for private use to the taxable profit in your (corporate) income tax return. This is called the additional tax liability (bijtelling). How much you have to add depends on the list price of the car, the level of CO2 emission, and the issue date of the license plate. You can bypass the additional tax liability if you keep a detailed trip administration that demonstrates you do not drive over 500 kilometres for private purposes.
Cars between 15 and 25 years old are called ‘youngtimers’. The additional tax liability rate for youngtimers is 35%. This is calculated over the current value of the car, not over the original list price. You can have the current value reassessed every year.
Choose between company car or private car
If you drive more than 500 kilometres per year, you can choose whether to keep your car for business or private use. You can make one choice per car. You need to choose by the time you file your first digital income tax return after purchase.
Will you keep the car for private use? If so, you cannot deduct any car expenses from your company profit. However, you may deduct 19 eurocents from the profit for each kilometre driven for business purposes. This business mileage allowance is particularly interesting if you drive many kilometres for your business.
Company car and VAT
Are you an entrepreneur for VAT purposes and does your company deduct VAT? Then you can also choose whether you have a company or private car for VAT purposes. This may be a different choice than for income tax. You may deduct the VAT on certain car expenses, but you must pay an additional charge for the private use of the company car.
Putting a car in your company’s name
When you buy a car, you have to transfer the registration certificate of the car to the new owner. That is your company, or you personally. It depends on your legal structure. Do you have a sole proprietorship (eenmanszaak)? Then you can only register the car in your own name. With other legal structures, you can choose to have the vehicle registered in your company's name. You can find more information at the Netherlands Vehicle Authority (RDW).
What does it mean for you?
Use our tool (in Dutch) to calculate the costs of a company car and a private car, and compare your options.Calculate now
Please note: this tool is only available in Dutch.