Deduct the leasing or renting of your vehicle

If you lease a car, rent a car, or use a shared car, you will receive an official invoice for it. You may deduct this invoice as a professional expense, provided it is of a professional nature.

The fact that you lease or rent does not affect the deductibility rate. Indeed, as with other car expenses, the maximum tax deductibility is determined based on:

1. The CO₂ emissions of the lease car, rental car or shared car
2. Its professional use

To determine the maximum tax deductibility of your lease car, rental or share car, use the gram formula.

120%- (0.5% x [coefficient] x CO2 )

The higher the CO2 emissions, the less the maximum tax deduction. So you benefit from choosing to be environmentally friendly.

A first example:

You choose to lease a gasoline car. Using the gram formula above, you arrive at a maximum tax deductibility of 68%. You may then enter the leasing invoice as a business expense and deduct 68%.

Do you also use the car partially privately? Then the tax deductibility is less, because you may not enter the private portion as a professional expense.

A second example:

You use the car 80% of the time for professional purposes. Then the tax deductibility in this case is 80% of 68%, which is 54%.

By the way, commuting to your own office does not count as a professional trip, but is a private trip. Don’t say we didn’t warn you 😉

What is the difference between leasing, renting or purchasing a professional vehicle?

While the deductibility of your professional vehicle remains unaffected by whether you choose to lease or rent it, the impact on your deductions in the initial year can vary significantly.

Indeed, the accounting treatment differs based on the acquisition method:

• Leasing or opting for a business loan means deducting only the interest on the lease, with the purchase amount being written off over the contract’s duration.
• On the other hand, renting allows for deducting the entire monthly payment. Since there’s no actual purchase involved, there’s no amortization either. You could then negotiate an initial higher exceptional payment to reduce your taxes in the 1st year of the acquisition of the car.

In practical terms, despite the contrasting accounting methods, the total deductions over the vehicle’s lifespan tend to align closely.

What about VAT for leasing or renting of vehicles?

Up to 50% of the VAT on company cars is deductible, even if you lease, rent or use a shared car. If you purchase a car, you pay the VAT in one lump sum, whereas you can only reclaim it (partially) after some time.

With leasing or a rental car, you do not have to advance the VAT, as it is included in the rental price or monthly invoice with leasing.