Buying a Second-Hand Car as a Sole Trader: What Can You Deduct for Tax Purposes?

Can You Buy a Second-Hand Car as a Self‑Employed Professional?

Yes. A self‑employed professional can perfectly buy a second‑hand car in the name of their sole proprietorship.

The condition is simple: the vehicle must be used for the professional activity. This may include visits to clients, travel between different work locations, or deliveries.

If the car is also used privately, only the professional share of the costs can be deducted. This rule applies both to VAT and to car expenses.

VAT: can you recover VAT when purchasing?

The recovery of VAT depends on the regime applied by the seller. Three situations occur most often.

Purchase from a private individual

In this case, the sale is not subject to VAT. Therefore, no VAT can be recovered.

Purchase from a professional applying the margin scheme

The seller pays VAT only on their profit margin. The invoice usually mentions 'special scheme – second‑hand goods – margin'. VAT does not appear separately on the invoice, so VAT cannot be recovered.

Purchase from a VAT‑registered seller with a standard VAT invoice

The invoice clearly mentions 21% VAT. In this case, a deduction is possible, but it remains limited by the professional use of the vehicle.

Even if the car is used exclusively for professional purposes, VAT recovery is limited to 50%. In case of mixed use, the deduction is calculated proportionally to professional use. If no detailed mileage log is kept, the tax administration often accepts a flat rate of 35%.

Example of VAT calculation

Imagine buying a second‑hand car for €20,000 excluding VAT, with €4,200 VAT.

If professional use is estimated at 60%, the recoverable VAT is calculated as follows:

€4,200 × 60% × 50% = €1,260 deductible VAT.

If the car is purchased from a private individual or under the margin scheme, no VAT can be recovered.

Tax deductibility of car expenses

Since 2023, the deductibility of car expenses depends on the vehicle’s CO₂ emissions. The following formula is applied:

Deduction = 120% – (0.5 × coefficient × CO₂ emissions)

The coefficient depends on the type of fuel used:

• 1 for diesel vehicles

• 0.95 for petrol vehicles.

The minimum deduction is 50%, or 30% for highly polluting vehicles. The maximum deduction reaches 100% for electric cars.

These rules apply to both new and second‑hand cars.

Changes starting in 2026

Car taxation is changing significantly for vehicles with combustion engines.

The purchase date becomes decisive:

• vehicle purchased before 1 July 2023: old rules remain applicable

• vehicle purchased between 1 July 2023 and 31 December 2025: deductibility gradually reduced to 0% by 2028

• vehicle purchased from 1 January 2026: no deductibility.

In other words, it is not whether the car is new or second‑hand that matters, but the date of acquisition. In this context, second‑hand electric cars are becoming increasingly attractive from a tax perspective.

What happens in case of mixed use?

When the car is used both for work and private travel, only the professional share of the costs can be deducted.

For example, if professional use is estimated at 70%:

• 70% of the car expenses are included in the CO₂‑based deduction formula

• recoverable VAT corresponds to 35% of the total VAT (70% × 50%).

Professional use can be justified through a mileage log. If no log is kept, the tax administration often accepts the 35% flat rate.

How should you record the purchase of a second‑hand car?

In the accounting of a sole proprietorship, the car is recorded as a fixed asset.

In practice:

• the purchase price excluding VAT is recorded in an investment account

• the deductible VAT is recorded separately

• the car is depreciated over a standard period of five years, or 20% per year.

If the remaining useful life of the vehicle is shorter and this can be justified, a shorter depreciation period may be applied.

Which documents should you keep?

To avoid any discussion with the tax administration, it is important to keep the following documents:

• the purchase invoice

• the registration certificate

• the technical inspection certificate

• proof of payment.

When the sale is subject to the margin scheme, this must be clearly mentioned on the invoice.

Treatment in the annual accounts

Each year, the depreciation of the car is recorded as a car expense. This expense reduces the taxable profit.

If you sell the vehicle, a capital gain or loss may arise. This is then taken into account for tax purposes in the year of the sale.

Second‑hand electric cars: a tax advantage

Second‑hand electric vehicles benefit from a particularly favourable tax regime.

Car expenses are deductible up to 100%. As for VAT, recovery remains limited to 50% when the vehicle is used exclusively for professional purposes. In case of mixed use, the deduction follows the proportion of professional use.

With the gradual disappearance of tax deductibility for combustion engines from 2026 onwards, second‑hand electric cars are often becoming the most attractive option from a tax perspective.

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