Reclaiming VAT for your car as a freelancer (‘zzp’er’): how does it work?

VAT deduction for a car registered as a business asset

If you register your car as a business asset, it becomes a fixed asset (‘bedrijfsmiddel’) of your company. This has specific consequences for VAT.

Purchase of the car

• VAT car (‘Btw-auto’): If you buy a new car, or a used car that still has VAT on it (a ‘btw-auto’), you can deduct the VAT on the purchase price fully or partially, depending on the business use.
• Margin car (‘Marge-auto’): If you buy a second-hand car from a private individual or a garage that no longer charges VAT (a ‘marge-auto’), there is no VAT on the purchase price, and you logically cannot reclaim any VAT.

Ongoing costs and VAT correction for private use

The VAT on the ongoing costs of your car registered as a business asset (e.g., fuel, maintenance, repairs, parking fees) is also generally deductible. However, if you also use the car privately, you must apply a VAT correction for private use at the end of the year.

There are two methods for this VAT correction:

• Fixed-rate correction (‘Forfaitaire correctie’): This is the easiest method. You withhold a standard amount from the VAT you reclaim: 2.7% of the car’s list price (‘cataloguswaarde’). If the car is 5 years or older and you still use it privately, this percentage is 1.5%. The advantage of this is that you don’t need to keep a mileage log.
• Actual private use (‘Werkelijk privégebruik’): You calculate the exact percentage of kilometres driven privately relative to the total number of kilometres driven. You apply this percentage to the total VAT reclaimed on the purchase and use of the car. This requires precise mileage logging.

When is it smart to keep a mileage log?

Experience shows that keeping track of your private use is often more advantageous than applying a fixed-rate correction, especially if you use the car relatively little privately. Do you drive less than 500 kilometres privately per year? Then it is certainly smart to keep a mileage log, because if you drive less than 500 private kilometres per year, you are exempt from the ‘bijtelling’ (private use addition to taxable income).

But even if you drive more than 500 private kilometres per year, accurate mileage logging can save you money. Suppose you have a car with a high list price, but you use it relatively little privately. The fixed-rate correction of 2.7% can then be a significant amount. If you can demonstrate that you only drive, for example, 5% of the kilometres privately, it is often more advantageous to base the VAT correction on this lower percentage.

VAT deduction for business use of a private car

If you also use your private car for your business, you can reclaim the VAT on the costs you incur for the business portion.

• VAT on costs: The VAT on fuel and maintenance for business kilometres is deductible. Road tax (‘Wegenbelasting’) and insurance premiums do not contain VAT, so no VAT deduction is possible on them.
• How to calculate the VAT? You calculate the percentage of business kilometres relative to the total number of kilometres driven. You apply this percentage to the VAT you have paid on your fuel and maintenance. You can only calculate this at the end of the year, because that’s when you’ll know the definitive proportion of business and private use.
• Mileage logging is crucial for business use of a private car: To substantiate the business portion of your costs and correctly reclaim VAT, a comprehensive mileage log (including business and private kilometres) is essential.

Important point of attention: Commuting from home to work (‘woon-werkverkeer’) counts as private use for VAT purposes, even if you feel you are travelling to work. Therefore, you cannot reclaim VAT on these kilometres. This is a common mistake. Take this into account when calculating your business VAT percentage.

Practical tip: Use a mileage tracking app such as Cartracker, Flitsmeister, or Fynch to accurately track your business and private kilometres. This makes it much easier to determine the correct VAT percentage and ensure your administration is complete.

The independent choice: car for Income Tax (IB) and VAT

This is an important tax point that many freelancers (‘zzp’ers’) are not aware of: the choice of whether to classify a car as a business asset (‘bedrijfsvermogen’ or ‘auto op de zaak’) or keep it as a private asset is independent for Income Tax (‘inkomstenbelasting’ or IB) and Value Added Tax (‘omzetbelasting’ or btw).

What does this mean in practice? For example, you can:

• Keep the car private for Income Tax (IB): You do this to avoid ‘bijtelling’ (private use addition). In this case, for IB, you deduct a mileage allowance of €0.23 per business kilometre.
• But treat the car as ‘business’ for VAT purposes: In this case, you can reclaim the VAT on the purchase and the VAT on maintenance and fuel costs, naturally with a correction for private use.

This scenario can be tax-advantageous if you drive a lot of business kilometres and still want to avoid the complexity and potentially high ‘bijtelling’ for Income Tax. You then benefit from some of the VAT advantages without having to put the car on the balance sheet for Income Tax purposes.

Watch out for the KOR scheme! Are you a freelancer (‘zzp’er’) and using the Small Businesses Scheme (‘kleineondernemersregeling’ or KOR)? Then you do not charge VAT to your clients and do not have to file VAT returns. As a result, you also cannot reclaim any VAT on your business purchases, including your car and car expenses. This applies to both a car registered as a business asset and a private car you use for business.

Common mistakes and points of attention

The VAT rules for cars can be complex, and mistakes are therefore frequently made. Here are some common pitfalls:

• Not performing a private use correction: If you also use the company car privately, you must always apply a VAT correction for private use at the end of the year. This is often forgotten.
• Forgetting receipts: Without proper receipts or invoices, you cannot reclaim VAT. So, keep everything tidy!
• Misinterpreting the 500 km rule: The 500-kilometre limit applies to Income Tax (‘inkomstenbelasting’) to determine if you pay a private use addition (‘bijtelling’), not directly for VAT. For VAT, you look at the actual private use.

These mistakes can lead to additional tax assessments from the Belastingdienst. Not a pleasant surprise!

What does this mean for your bookkeeping?

The VAT on car (use) is an important part of your bookkeeping. Correctly processing all these matters requires attention and knowledge. This includes recording receipts, keeping your mileage log, and applying any VAT corrections and ‘bijtelling’ (if applicable for Income Tax).

An accountant like Kees de Boekhouder can help with this:

• We check all VAT corrections and assist with your VAT returns.
• We advise you on the best choice between a car registered as a business asset or a private car, suited to your situation, and how you can treat this separately for IB and VAT.
• You don’t have to worry about the complex rules; we’ll take care of it for you.

Sounds interesting? Schedule a no-obligation introductory meeting with Kees de Boekhouder. We are happy to take your worries off your hands!