The purchase or rental of a vehicle is sometimes necessary for the activity of a company/business. We may therefore wonder to what extent it is possible to include your car and related costs in your company's expenses. On the other hand, you must be careful on this subject because the tax administration has set rules to respect.

Definition of a professional vehicle

A vehicle is called “professional” if it is used exclusively for business trips. For example, to go tocustomer/supplier meetings, prospect or simply develop your business. For this, the business manager has two solutions. Either you buy or rent a car by putting the registration document or the rental contract in the name of your company. Either you reimburse yourself for mileage allowances based on the number of kilometers traveled for your professional journeys with your personal vehicle. The mileage package is between approximately 40 and 60 cents per kilometer.

A professional vehicle can be purchased in four different ways

- Leasing, that is to say, the company can rent a vehicle for a maximum period of five years. At the end of this period, the company can decide to buy it by exercising a purchase option, the amount of which is provided for in the contract.

- Bank credit, the company will have to pay loan interest but you are the direct owner of the vehicle.

- A long-term rental (LLD), the vehicle is rented to the company for one to five years and for a specified mileage. The company does not have the option of becoming the owner of the vehicle at the end of the contract.

- Equity capital, the company uses its own cash to finance the vehicle.

The rules for accounting for a car in your company

The purchase or rental of a vehicle by the company benefits the company financially. In fact, this allows him to save taxes thanks to depreciation charges brought about by this acquisition. When purchased, a car is generally amortized over 4 to 5 years. If you rent it, the rent will be charged to your accounts month by month. In return, the company will be required to pay every year a tax on company vehicles (TVS). This tax is calculated according to the fiscal power and the level of CO2 emissions of your vehicle. Electric and hybrid cars are exempt from TVS. Secondly, you must keep all supporting documents concerning your vehicle in the event of an accounting audit by the tax authorities.

If I use my vehicle both professionally and personally

In the case of mixed use of your car and if you purchased or rented your vehicle in your company's accounts, the tax administration may consider the portion of personal use as a benefit in kind. This will result in high social security contributions to be paid via pay slips.

The best solution to avoid this drawback is to use mileage allowances. This system is used to reimburse fuel costs, wear and tear and maintenance of the vehicle as well as insurance costs. You will still need to remember to keep proof of expenses in the event of an inspection. These mileage costs are then calculated according to a mileage scale and will be deducted from your company's accounting results.

VAT tax rules

When the vehicle is qualified on your registration document as « passenger vehicle » and you put this vehicle in your company's accounts, you do not have the possibility of deducting VAT on the purchase of the vehicle nor on maintenance and repair costs. As a reminder, a passenger vehicle is a sort of standard vehicle, 5 doors, that you can use to transport people. Unlike utility vehicles, which are voluntarily limited to 2 seats, and which conversely allow VAT recovery.

In conclusion, when you decide to buy or rent a car in your company we strongly recommend that you use your accountant in order to secure your accounting and tax organization.