Business lease
With business leasing, the car is in your company's name. The car is part of your company's assets and you pay a fixed monthly amount to the leasing company. You treat this amount as business expenses. Business leasing is particularly interesting if you drive many business kilometres and need a car that is always available. You process the costs in full in your accounts, which affects your profit and thus your taxes.
All expenses deductible
You may deduct all car expenses when the car is business lease capital. These include lease expenses (in the case of an operational lease), maintenance, insurance, fuel and other running costs. These expenses directly reduce your profit. The tax authorities want you to record these costs clearly, so it is visible that the car is actually used for business purposes.
VAT refund
You may charge VAT on car expenses as preload reclaim VAT as long as you have turnover for which you pay VAT. You include the VAT on lease costs, fuel and maintenance in your VAT return. If you also use the car privately, you must make a correction at the end of the year. This is mandatory because without this correction, the car would yield too much business benefit.
Addition
If you drive more than five hundred private kilometres per year in a business car, you will pay addition. You then add a percentage of the catalogue value to your income. You pay income tax on this. If you drive less than five hundred private kilometres, the additional taxable benefit does not apply, but you must prove this with a comprehensive trip registration form in which you record every trip.
Private lease
With private leasing, you enter into the contract as a private individual. The car remains private assets and does not enter your business records. You cannot deduct the lease costs. For business trips, you use the mileage allowance. Private lease is suitable when you drive for business but do not want to be tied to the rules and obligations that come with a business car. The administration is simpler, but you have no deductions.
Mileage allowance
For business trips, you can deduct 23 cents per kilometre from your profit. This allowance applies to every business kilometre, including commuting. The kilometre allowance replaces all car expenses. So you may not deduct fuel, maintenance or lease costs. The tax benefits are limited but easy to apply.
Mileage tracking
You need to be able to prove how many business kilometres you have driven. That is why you keep a trip registration where you record the date, starting point, ending point and business purpose. The tax authorities can check these details. Without trip registration, you cannot apply the mileage allowance.
Leasing or buying a business car
When you need a car, you can choose between business buying or business leasing. If you buy the car, you pay the purchase price all at once or via a loan and the car becomes your property. You write off the car over several years and treat maintenance, repairs and fuel as business expenses. Leasing gives predictable monthly costs and you don't have to make a big investment. You do not build up ownership and you are tied to a fixed term. The choice depends on the liquidity of your business and how much flexibility you need in your monthly costs.
Advantages and disadvantages of leasing
Leasing gives you predictable monthly costs and less worry about maintenance, but you often pay more in the long run and are stuck with contract terms. Below you can clearly see the differences.
Table of pros and cons:
| Advantages | Cons |
| Predictable monthly costs | Long-term often more expensive |
| Maintenance often included | Contract limits flexibility |
| No major upfront investment | Additional costs for more kilometres |
| Fewer financial risks | No ownership with operating lease |
Leases for sole traders
You can choose from financial lease or operational lease. Financial lease works like buying by instalments which makes you the economic owner and puts the car on your balance sheet. Operational lease works like renting where the lease company remains the owner and you only pay for its use. The difference determines how you handle costs, how much risk you bear and how much certainty you have about maintenance and monthly costs.
Financial lease
At financial lease you are economic owner. You pay for the car in instalments and put it on your balance sheet. You write off the car and use it entirely as business assets. However, you bear the risk of depreciation and have to arrange maintenance and insurance. The monthly lease costs are not deductible here, but the interest paid on the loan is.
Operational lease
At operational lease the leasing company remains the owner. You use the car and return it after the contract period. Maintenance and insurance are often included in the monthly charge. The car does not appear on your balance sheet. You choose this form when you want predictability and low risk. With operational leasing, the monthly lease costs are fully deductible as business expenses.
Costs and concerns
With business leasing, you have to take into account additional taxes, VAT corrections and the administrative work involved. You check whether the mileage bundle suits your annual usage. With private leasing, you have to consider the impact on your credit limit and the fixed monthly expenses you have to bear privately. Always look carefully at the terms and conditions so that you do not face unexpected costs. A clear contract and a realistic assessment of your usage will ensure that you make the right choice.
