How to deduct your second-hand car?
In 2020, the cars’ taxation underwent a couple of changes. We shed full light on these changes below, including their impact on second-hand cars!
Since 2020, you calculate the deductibility of your car based on its CO2 emissions. This new calculation applies to the purchase of a car and its depreciation, as well as to fuel, repairs, spare parts, interests you pay on a loan to finance your car, etc.
Here’s this formula you should know – just replace the coefficient with 1 if it’s diesel, 0.95 if it’s gasoline, 0.90 if it’s CNG:
120% – (0,5% X coefficient X CO2/km)
This formula also applies to your car if it is a second-hand car!
There is one exception to this rule, that may apply to you if
(1) you are self-employed as a natural person, not as a company
(2) that you have bought or leased (your leasing contract or purchase order should prove it) your car before 1 January 2018.
If you meet both conditions, the old system of deductibility, in stages, is still in place.
Amortization of your (second-hand) car
A car is a significant investment, meant to last over several years. You deduct a percentage of this investment, based on how long you expect to use your (second-hand) car.
The percentage of amortization is based on your purchase price, your percentage of business use (excluding commuting to and from work), your tax deductibility rate (according to the formula above), and … last but not least … the percentage of the expected useful life of your second-hand vehicle.
If you bought your car for 6 500 euros, that your professional is 30%, that the car has a deemed useful life of three years and a tax deductibility rate of 61%, you would have:
6 500 € X 30% X 61% X 33% = depreciation to be deducted this year.
In the year in which you sell your car or stop using it, you cannot enter any depreciation.
Recovering VAT on your used car
When you buy a used car, you may only ever get back part of the VAT…
Explanations: VAT is recoverable either up to 35% in the case of a mixed-use vehicle or up to 85% in the case of a utility vehicle, a van for example.
Do you want to recover 100% of the VAT on your utility vehicle? You then need to be able to demonstrate that you use the utility vehicle exclusively for business purposes and that you do not drive a single kilometer for private purposes.
Are you a complementary self-employed?
Like any self-employed person, you deduct your car according to its deductibility rate, as per the rules of 2020.
You take into account its useful life in the calculation of depreciation. You recover a little, a lot, or no VAT depending on what you find on your purchase invoice.
The difference with the self-employed person as your main occupation is your rate of professional use: you probably have a lesser professional use than someone who is a full-time self-employed. You will always deduct your car and its costs in proportion to the professional use you make of it, excluding commutes between your home and the place of your additional activity.
Otherwise, you must be able to prove that you use the vehicle in question solely for your additional activity, that it is perfectly suitable for your additional activity and that you have an alternative for your private life and your main occupation … Not an easy task!
You must take these elements into account when buying a car: they determine your budget!
Once you have bought your car, our app allows you to keep all the receipts related to it in a safe place and, above all, to find them encoded in the right accounting category. Your VAT return is automatically generated based on them!