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Car business or personal

When deciding whether to buy a car for business or personal use in the Netherlands, there are several factors to consider. Let's explore both scenarios, including the applicable rules for 2024.
Before choosing the best option for you and your company, you need to first consider the following key factors.

Key Factors to Consider:

Percentage of business vs. private use
Total annual mileage
Type of car (electric vs. conventional) and its catalog value
Your personal tax situation and business structure

Let's compare the differences:

Buying the Car with the Company

If you choose to purchase the car through your business, You’ll deduct 20% of the car’s value minus the restwaarde each year for 5 years from your profit. After 5 years, only the car's estimated value (restwaarde) will remain on the balance sheet. This estimated value is what the car is expected to be worth at the end of the 5 years.

When you buy a second hand car it might be a marge car this means that will not pay VAT on the purchase prive, when you sell the car after a few years you will be obliged to charge VAT on the selling price.

here are the key considerations:

1. Bijtelling (Private Use Addition)

In 2024, if you use the company car for private purposes (more than 500 private kilometers annually), you'll be subject to bijtelling:

For most cars: 22% of the catalog value is added to your taxable income.
For electric cars: 16% of the catalog value up to €30,000 is added, with 22% applied to the remaining value.
For cars 15 years or older: 35% of the current market value is added

For sole proprietorships and partnerships, this will be included in personal income tax. For limited liability companies (BV), the bijtelling will be calculated and reflected in the DGA's monthly payslip.

To ensure you won't incur bijtelling charges due to driving less than 500 km privately per year, it is crucial to keep a detailed km log. You will be obliged to record each trip with the date, initial odometer reading, starting point, ending point, end odometer reading, amount of kilometers driven, and whether it was for business or personal use. This helps you calculate the percentage of business use, which lets you deduct that percentage of the costs and VAT from your expenses.

!! This includes also using the car for a personal holiday trip

2. Tax Deductions

All car-related expenses are tax-deductible, including fuel, maintenance, insurance, and depreciation.
VAT on the purchase price and running costs is deductible if the car is used primarily for business. (more than 50%)

3. VAT Considerations

You must make a VAT correction for private use, either based on actual use or using a flat rate of 2.7% of the car's list price (including VAT and BPM).
If you charge a personal contribution for private use, you must ensure it meets the "normal value" requirement to avoid additional VAT adjustments.

Buying the Car Privately

When you use a privately owned car for business purposes, you have two options:

1. Kilometer Reimbursement:

You can claim a tax-free reimbursement of €0.23 per kilometer driven for business purposes.
This rate applies to all business-related travel, including commuting to work.
The reimbursement is tax-deductible from your business profits, reducing your overall taxable income.

To ensure you will be able to declare the business km in your bookkeeping, it is crucial to keep a detailed km log of all business trips. All trips must be recorded in a km register in this register needs to be included the date, starting point, end point and amount of KM driven.

2. Actual Cost Method

Alternatively, you can choose to deduct the actual costs related to the business use of your private car.
This includes a portion of maintenance, fuel, insurance, and depreciation costs based on the percentage of business use.

To deduct costs using the actual method, you need to keep a detailed kilometer log for all business and private trips. You will be obliged to record each trip with the date, initial odometer reading, starting point, ending point, end odometer reading, amount of kilometers driven, and whether it was for business or personal use. This helps you calculate the percentage of business use, which lets you deduct that percentage of the costs and VAT from your expenses.

!! This includes also using the car for a personal holiday trip !!

It's important to note that you cannot use both methods simultaneously. You must choose either the kilometer reimbursement or the actual cost method.

Key points to remember:

The €0.23 per kilometer rate is the simplified method and is often preferred due to its ease of use and record-keeping. (keep list of only business trip KM)
If you choose the kilometer reimbursement method, you cannot additionally deduct maintenance or other car-related expenses for the business portion of use.
Whichever method you choose, you must keep accurate records of your business kilometers.
The VAT paid when purchasing a private car is not recoverable, but you may be able to deduct a portion of VAT on maintenance and operating costs based on business use percentage
When you choose the actual cost method all expenses will have to be paid from the business account and all receipts have to be recorded in the bookkeeping.

Comparison and Considerations

Company Car Advantages:	Private Car Advantages:
Full tax deductibility of car expenses Potential for lower upfront costs if the company has better financing options Simplified accounting for business use	More flexibility in car choice without considering bijtelling No need to track private mileage (unless choosing actual method) Potentially lower tax burden if business use is limited

Recordkeeping Requirements

Regardless of which option you choose, maintaining accurate records is crucial:

For a company car, you must keep a detailed log of all trips, especially if you claim no private use.
- pay all expenses from the business account and register all receipts of expenses in your bookkeeping.
For a private car used for business, track all business-related mileage for reimbursement claims.
- Simplified method: only keep track of business km
- Actual method : keep a detailed track of all business and private km, pay all expenses from the business account and register all receipts of expenses in your bookkeeping.