Lease car for your sole proprietorship: how do VAT and taxation work?

What is car leasing and how does it work for self-employed individuals?

Car leasing is a long-term rental agreement where you, as a self-employed person, use a car without purchasing it immediately. The leasing company remains the owner, and you pay a fixed monthly fee.

There are two main types:

• Financial leasing: you rent the car and have the option to buy it at the end of the contract (usually for a residual value of 10 to 15%). In addition to the lease cost, you also pay for insurance, maintenance, etc. yourself.

• Operational leasing (also called “full service lease”): you rent the car but do not purchase it. At the end of the contract, you simply return it. Maintenance, insurance and road tax are often included.

For a self-employed person, leasing is fiscally interesting because you can partially deduct costs and VAT as business expenses.

How much does it cost on average to lease a car as a self-employed person?

The monthly lease price depends on:

• the brand and model of the car
• the type of contract (operational or financial)
• the number of kilometres per year
• and the included services (maintenance, insurance, tyres, roadside assistance, etc.)

On average, a self-employed person pays between €400 and €900 per month excluding VAT for a standard passenger car. If you choose an electric car or a premium model, this amount can exceed €1,000.

Important: leasing usually requires an upfront payment (advance) or deposit. Some offers advertise “leasing without a down payment”, but the monthly cost is then higher.

What are the advantages of car leasing for self-employed individuals?

Leasing offers several advantages:

• No large upfront investment: you maintain cash flow because you do not have to purchase the car
• Predictable monthly costs: maintenance, insurance and taxes can be included
• Tax deductibility: the monthly lease invoices and related costs are deductible based on business use and CO₂ emissions
• Less administration: the leasing company often handles insurance, maintenance and registration (operational leasing)

For sole proprietorships, the combination of ease of use and fiscal clarity is particularly attractive: you know exactly what it costs you each month.

Is the VAT on a lease car deductible?

Yes, but not fully. VAT is only deductible based on the professional use of the car.

• If you use the car 100% professionally → you may deduct a maximum of 50% of the VAT
• If you use it partly privately (which is usually the case) → you estimate the business use and apply that percentage to the maximum deductible VAT

Example: based on CO₂ emissions, you can recover 50% VAT. You use the car 70% for business purposes. You can then recover a maximum of 35% (50% × 70%) of the VAT.

Note:

• VAT on fuel, maintenance and lease payments follows the same deductible percentage
• VAT on private use cannot be recovered

TIP: If it concerns a light commercial vehicle or van (and it is used exclusively for professional purposes), the costs and VAT may sometimes be fully deductible (up to 100%).

What about the tax deductibility of the lease cost itself?

The lease cost (monthly amount) is tax deductible as a business expense, but the deduction percentage depends on the car’s CO₂ emissions.

Since 2023, the new CO₂ formula applies:

Deduction percentage = 120% – (0.5 × coefficient × CO₂ emissions)
where the coefficient is 1 for diesel and 0.95 for petrol.

The maximum is 100%, the minimum is 50% (30% for highly polluting cars). Electric cars are 100% deductible. Plug-in hybrids are limited to 75% in 2025.

Example:

Your lease car (petrol) emits 100 g CO₂/km.
→ 120 – (0.5 × 0.95 × 100) = 72.5% deductible.

Note: from 2026, the deductibility of combustion engine cars will gradually decrease, until they are no longer deductible at all for newly acquired vehicles from 2028.

Are all costs included in the lease price?

This depends on the type of lease contract:

• Operational lease: usually all-in (maintenance, insurance, tyres, taxes)
• Financial lease: usually only the car itself, without additional services

Carefully check what your monthly invoice covers. VAT and deductibility only apply to the components clearly stated on the invoice.

Fuel is usually not included in the lease price. It follows the same deductibility as the lease cost. Only charging costs for electric vehicles or plug-in hybrids are 100% deductible.

Tip: the interest you pay as part of the lease price is considered financing cost and is 100% tax deductible (no limitation applies as with other costs).

What is the difference between car leasing and private lease?

• Car leasing for self-employed individuals: the vehicle is used for business purposes. You can (partially) deduct VAT and costs
• Private lease: you lease as a private individual → no VAT deduction, but it can still be a business expense

Both work according to the same principle (fixed monthly price, no purchase), but the fiscal treatment differs regarding VAT. Since you do not receive an invoice in the name of your business, you cannot recover VAT.

Are there price differences between private lease and business lease?

Yes. A business lease (in the name of your sole proprietorship) is usually:

• slightly cheaper excluding VAT due to VAT deductibility
• but may involve more administration (invoices, accounting processing)

A private lease is simpler, but more expensive because you cannot recover VAT. For comparable cars, the net monthly cost for a self-employed person is therefore often lower with a business lease.

Benefit in kind?

In a sole proprietorship, you are not an employee of your own business. Therefore, you cannot grant yourself a company car as in a corporation. The concept of “benefit in kind” only applies when an employer provides a benefit to an employee or company director.

PIA Go! helps you choose and calculate

Leasing is a smart choice for many self-employed individuals: tax-efficient, clear and hassle-free. But every situation is different: the difference between 70% and 100% deductibility can amount to hundreds of euros per year.

With PIA Go!, you stay focused on your work while your accountant handles the fiscal complexity:

• We calculate how much VAT and costs you can deduct
• We closely follow tax deduction rules
• And we advise whether leasing, buying or renting is the most advantageous for you

Try PIA Go! and discover how simple accounting can be.
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