A van used for transporting goods for your business may be eligible for deductions, but the rules are different, depending upon if you purchase or lease the vehicle.
Purchasing a van
When you buy a van, you must decide whether you’ll use the van 100% for business or if it will be mixed-use.
A mixed-use van is used for private and company purposes.
Buying a van – used 100% in the company
You will receive an invoice when you purchase a van which may or may not include VAT. If it’s a new car, the invoice will normally contain VAT. If it’s a used car, sometimes there is no VAT – if the car was previously owned by a private person, for instance.
If you use the car 100% for business, and you have an invoice that includes VAT, you can deduct the full VAT in your accounting. The requirements are that you use the car 100% for business purposes and that you can actually see VAT on the invoice.
When you buy a car from a private person, there is normally no VAT. If you make a contract with this person, pricing the van at 50.000 DKK, for instance, then you cannot just calculate the VAT; it must appear on the contract if you want to make the deduction.
Sale of the van
If you’ve deducted VAT when you purchased the vehicle (which you only do for 100% company use), you must also add sales VAT when you sell the van. If you have a mixed-use van, you needn’t add VAT when you sell it, as it wasn’t included in your purchase. You will be taxed on a profit from selling the van, or you will get a tax deduction if you lose money, when selling the van.
When it comes to tax, if you use the car 100% for business, Dania Accounting will first deduct the VAT, and the remaining amount will be booked in your company as an asset. If you buy a used van with no VAT, we deduct 25% of the value of the car as depreciation.
Buying a mixed-use van – partly used in the company, partly used for private purposes
If you use the car for business and private purposes – whether 1% private/99% business or 50%/50% – , then you are not allowed to deduct any VAT on the purchase. Private use excludes you from the VAT deduction on the purchase. So even if you bought an expensive van with 30-40.000 DKK of VAT shown on the invoice from the car dealership, you are not allowed to deduct anything if the van is mixed use.
The tax rules is a little different from the VAT rules.
When you buy a used van or mixed-use van where you’re not allowed to deduct any VAT, then the full amount of the van’s purchase will be booked as an asset and a tax deduction is calculated from this amount.
If you buy a van only used for the business, then when Dania Accounting does the annual report, we are allowed to deduct 25% of the van’s value as a cost (the first year we depreciate 25% of the purchase sum, the second year 25% of the remaning amount after the firsts years depreciation, the third year also 25% of the remaining amount after the depreciation done in the second year etc. – until everything is depreciated).
If you buy a mixed-use van, we deduct 25% of the value of the car as depreciation, and then calculate a partial tax deduction, according to how often you use the car for your business. If you use the car 50% for private purposes, for instance, then we first calculate the 25% depreciation, 50% of that amount will be the tax deduction from the value of the car.
Leasing a van
The rules for leasing a van are different. If you use the van 100% for business, then you are allowed to deduct 100% of the VAT. If you use a leased car for both private and business purposes, you’re only allowed to deduct a third of the VAT shown on this invoice.
Ongoing costs for a van
There are also ongoing costs when operating a van, such as gas, diesel, insurance, road tax, etc. The rules are if you use the car 100% for business, then you are allowed to deduct the VAT of your costs. Be aware that not all costs have VAT; parking, insurance, and road tax, for instance, are normally exempt from VAT. The costs that qualify are normally gas or diesel, service on the vehicle, bridge crossings, etc. These rules also apply to use of the van for mixed purposes. Even if the van is used 99% for personal use, you’re still allowed to deduct 100% of the VAT for the ongoing costs.
Booking bills or using a fixed “per kilometer deduction” as costs
In terms of ongoing costs, if you aren’t good at saving bills, then every time you forget to input your gas/diesel bills in your accounting, you will lose a VAT and tax deduction everytime you forget to save a bill and give to us. As an alternative, you can choose to use another set of rules, which involve using a fixed amount for cost per kilometer driven. It’s easier if you can’t keep track of your bills, but depending on the type of van you own or lease, it may not financially work in your favor.
If you do choose to go the fixed amount per kilometer route, we recommend that you download an app on your smartphone to keep track of how many kilometers you drive. On the app, you can click whether it’s a private trip or a business trip. At the end of every month, you’ll have an accurate report which will serve as the document we book in your accounting and will track your travel if you have a tax inspection.
When you’ve supplied the report to Dania Accounting, we can calculate a deduction. In 2018, the deductible amount is 3,54 DKK per kilometer for the first 20.000 kilometers you drive each year. If you exceed 20.000 kilometers, the amount drops to 1,94 DKK per kilometer. The 3,54 DKK per kilometer includes everything except parking, or when you use a ferry or cross a bridge. You can add these extra costs (parking, ferry, bridges) to your income tax deduction, but you must save the bills for these, if you want the income tax deduction.
Is it better to use the bills or the kilometers?
This is difficult to answer, because first you must calculate how much the deduction would be if you use the bills on the car to compare it to the amount you can deduct with the kilometers driven. So to answer this question, you must know the price of the car, how many kilometers you drive per year, the kilometers/liter of gas or diesel, etc. In order to recommend bills over kilometers, we’d need a number of details to give a proper estimate.