What costs are deductible as an entrepreneur with a lease car?
30 september 2021
Do you spend a lot of time in the car on the way to customers or company visits? A car is indispensable for many entrepreneurs. You can choose to purchase a car, but leasing is also popular these days. Financial leasing in particular is often chosen, because as an entrepreneur you are exposed to many tax benefits. You can read what these advantages are below.
Financial leasing
When leasing a car on the basis of a financial lease, you are immediately the owner, from an economic point of view. This means that the car will appear on your company's balance sheet. This makes some costs tax deductible. This is one of the reasons that financial leasing is a popular lease form among entrepreneurs.
1. VAT refund
If your company is liable for VAT, you can reclaim the VAT if you lease a car on the basis of a financial lease. You can choose to submit this tax return monthly or quarterly. This means that it also depends on when you get the amount back. You can also choose to reclaim the VAT in one go on the next tax return, so that the VAT is settled in one go. That saves a lot of costs.
2. Interest deduction
Financial lease is actually a business loan in the form of an annuity. So you have to pay interest for this. It also means that you can deduct the interest you pay on the lease amount every year from the profit you have made within your company. To determine the amount of interest, you can use an amortization schedule. This schedule gives you insight into how much interest you have to pay each month and you can then calculate how much interest you can deduct when filing your tax return.
3. Investment deduction
When you, as a company, invest in business assets, you are entitled to the investment deduction. Thanks to this deduction, your profit is lower, which reduces your business tax. The investment deduction is divided into three types of schemes, which you can use as an entrepreneur. These are the small-scale investment deduction, energy investment deduction and the environmental investment deduction. However, it is not possible to benefit from both the energy investment deduction and the environmental investment deduction.
4. Depreciation
If you, as an entrepreneur, lease a car financially, you can write off the costs. It is seen as a business asset. You calculate the costs that you can write off as follows: divide the costs over the number of years that the car has been used and you can deduct twenty percent of this for tax purposes. By deducting these costs from your profit, you pay less tax.
There are some exceptions
The above tax benefits do not apply to everyone. In a number of cases, the tax authorities determine that some costs are not deductible. An example of this is that you are not entitled to tax benefits if you do not use the lease car as a business car. You are only entitled to this if you actually use your lease car for business purposes. A friend who is not employed by your company but drives a lease car is not entitled to these tax benefits.
