Declaring private items as business assets – smart or not?
You started a company and you want to get to work. There’s a good chance you will need a laptop or maybe certain equipment or tools. But do you need to buy these items again if you want to declare them as a company asset or is it also possible to declare that drill or drawing tablet that you already bought privately last year as business costs?
No double costs
It is possible to declare items that you bought before starting your company as business costs. It can be beneficial because this way you don’t have to buy them again and you can deduct them from your turnover. This will lower your profit and you ultimately pay less income tax. How you process this in your administration depends on whether you bought the items with the intention of using them privately, or whether you already intended to use them for your business.
What’s it worth?
If you had the intention to use the item privately at the time of purchase, you’ll need to put it in your accounts at the current market value. This is the same price at which you would sell it if you were to sell it on Marktplaats, for example. In fact, you ‘sell’ it to your own company. Because you sell it as a private individual, you don’t charge VAT and that means you can’t reclaim this in the VAT return.
Did you buy the same laptop with your future company in mind and can you demonstrate this? Then you can put it in the administration for the full amount and also deduct the VAT on your first VAT return. It’s important that you can add the original receipt or invoice as well.
Is the value over € 450? Then the business asset is considered an investment and you aren’t allowed to deduct the costs in one go. You must write off the product. This means that you spread the costs over a period of five years.
So declaring privately purchased items as business costs is beneficial. But is it always smart to do so? As you might have guessed, there are exceptions. For example, do you own a car or (electric) bicycle? Then it’s wise to first calculate whether it’s advantageous to declare it as a business asset or to keep it private.
If you declare these means of transport as business assets, you can declare all related costs. On the other hand, a private addition is charged in the income tax return. If this addition is higher than the costs you can declare, this can be disadvantageous.
Do you want to know for sure what is sensible in your situation? Your accountant will be happy to calculate it for you!