Entrepreneur’s vehicle expenses
These instructions concern the taxation of a self-employed individual or an operator of a small business.
The instructions contain the following sections:
When a car is in a company’s use, the tax imposed depends on whether it is considered to be in business use or private use.
- A vehicle is considered to be in business use if it has been acquired with the intention of using it in business activities and more than 50% of the kilometres driven relate to business. Read the instructions for filing: Cars, dwelling, business trips and private use at Vehicles included in business equipment
- A vehicle is considered to be in private use if 50% or less of the kilometres driven during the tax year were for business purposes. Read the instructions for filing: Cars, dwelling, business trips and private use at Use of a private car for business-related driving.
If you have used a car owned by your spouse for business purposes, decision on whether your spouse’s car is included in business assets is made in a similar way as decision on whether your own car is assigned to business assets or private assets.
- Passenger cars and vans, if they are included in fixed assets
- Other vehicles than passenger cars and vans, if they were partly in private use during the tax year
- Leased vehicles, if the leasing contract was made for more than 3 months.
You cannot deduct the expenses and kilometres of company cars that are used by employees.
- Trips to places where the company has operations (fetching goods from a warehouse, visiting a client).
- Temporary trips outside the company’s regular area of operation. Read instructions on deducting the expenses for business travel here. (Cf. the employee’s daily allowances).
Other use of a vehicle is considered private use. For example, driving from home to work (the company’s place of business) is not considered business use. You can deduct the commuting expenses on your personal tax return.
To keep your business use and private use separate, keep a driver’s log or other such document to keep a record of the kilometres you drive for business purposes. The driver’s log must indicate the total kilometres driven in the vehicle during the tax year. With regard to business-related use, the log must contain the following information:
- start and end time of the trip
- start location, end location and, if necessary, the route driven
- kilometres driven
- purpose of the trip
- odometer reading at the start and end
- the driver of the car
- total kilometres driven in the car during the year.