Is car VAT deductible for corporate taxation?
When is the company car VAT deductible for taxation in Finland? Can company cars be used for private journeys at all? Our article will answer these questions!
What should an entrepreneur acknowledge when buying a company car for which VAT is deductible for company taxation?
Car VAT is not always a deductible item for VAT taxation. While purchasing a car, it is important to consider the purpose for which the car has been purchased for the business. For VAT taxation, it is also relevant whether the car purchased for the company is a passenger car or a van.
VAT - Passenger car
A passenger car is under closer scrutiny for VAT taxation. If the car is used for any private or other driving that does not qualify for a VAT deduction, it will "contaminate" the car for any VAT deductions. The car must therefore be 100% used by the company in order to deduct the VAT on the car for company taxation. Exceptions apply with taxis, driving school cars, and cars for sale or hire, in which case VAT on business use can be deducted in the same way as for the van described below. The tax authorities are very strict with this point.
VAT - Van
When the car purchased for a business is a van, it can be used for private journeys without losing the full VAT deduction. In this case, private and business journeys must be distinguished by a logbook showing the VAT-deductible journeys related to the business activity, as well as private journeys not related to the business activity, or other journeys that are not VAT-deductible. The VAT deductible part of the purchase price and running costs of the car is the part relating to VAT-taxable journeys.
Does the use in favor of a shareholder's car benefit remove the car's VAT deductibility?
The shareholder car benefit means that the company also pays the costs of the car for private use. In this case, the car is used for private purposes which are not VAT deductible. In most cases, the car benefit is on a passenger car, so the non-deductibility of VAT is clear. Therefore, VAT cannot be deducted on a car that is part of a shareholder's car benefit.
Does the company form affect the VAT deduction of the car?
No. The VAT rules apply in the same way, whether you are a limited company, a limited partnership, a general partnership, or a proprietorship.
Summary:
- The passenger car must be 100% used for VAT deductible purposes by the business in order to qualify for the VAT deduction
- A van and the cars used for sale or hire, as taxi or for driving instruction must keep a logbook to separate private and business use. The right to deduct VAT is implemented on the company's VAT deductible journeys
- The car benefit does not give a right to deduct VAT
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