VAT deduction for company cars: tolerance for 2020
The VAT deduction for vehicles is a very complex story. As a general rule, this deduction can never exceed 50% for passenger vehicles. In case this vehicle is also used for private purposes, the deduction limitation can be even higher. The VAT authorities make it easier for you to demonstrate a few things during the corona crisis.
10 years ago
The scheme that limits the VAT deduction for motor vehicles is now more than 10 years old. It dates from 29 December 2010 and came into effect on 1 January 2011.
The law more generally dealt with business assets and stated that the VAT deduction of business assets that are also used for private purposes should be limited to the professional use. A company car that is also used by the staff member for commuting is such a typical example of private use of a company asset.
In addition, you should not lose sight of the fact that the VAT deduction of cars is in any case limited to 50%. If you have a commercial vehicle that is used for 60% professionally, the restriction applies to 50% (at least if we are talking about passenger cars). If the commercial vehicle is only for 40% professional use, also the VAT deduction is limited to 40%. We emphasize here once again that professional use must be seen from the perspective of the VAT taxable company that makes the car available: commuting is not a professional activity for the company.
Actual use of lump sum deduction
How do you determine professional and private use? The tax authorities give you 3 options.
The first method is based on the effective use and assumes a trip administration. You must therefore record daily trips for business purposes: date of the trip, start address, end address, kilometers traveled per trip, total kilometers traveled per day.
The second method is the so-called semi-flat-rate method. This method is intended for entrepreneurs who provide a company car to the staff who use it to commute to work. The private use is then based on the distance between the place of residence and the place of employment: [(distance commuting x 2 x 200 + 6.000) / total distance] x 100. If you look more in detail to this formula, you can see that the tax authorities assume that the staff makes 200 round-trip trips to work per year and travels another 6.000 km for other private purposes.
The third method is without doubt the easiest one: the professional use is 35% and the VAT deduction on the vehicle is therefore immediately limited to 35%. If you opt for this flat-rate method, you must use this calculation method for at least 4 years. Switching when it suits you best is therefore not possible.
In order to apply the second method, the staff member is required to go to the office more or less 200 times. With the obligation to work at home since 2020, this condition is no longer fulfilled. If you were to apply this method in full, it would have a particularly large impact on the VAT deduction. But if you would switch to the application of the general flat-rate, you would be bound by it for 4 years.
The administration now provides a tolerance for this rule. Anyone who usually uses the second calculation method may exercise the right to deduct before 2020 via the general fixed amount of 35%. Those who wish, may combine the second 'semi-fixed' method and the third 'fixed' method (which in principle is not permitted).
This only applies for calendar year 2020. From calendar year 2021 you must use the second method again. The obligation to make use of the general flat rate of 35% for at least 4 calendar years does therefore not apply.