Use of the entrepreneur’s own tools, machinery and vehicles in a limited company’s business operations

A limited company cannot use machinery, equipment, or vehicles owned by a private individual without appropriate agreements or compensation arrangements.

There are three main ways for a limited company entrepreneur to receive compensation for the use of personally owned machinery, equipment, or vehicles in the company's business operations:
 

1. Renting the assets to the company

The entrepreneur can rent personally owned machinery or equipment to the limited company. The rental payment is a deductible business expense for the company and rental income for the entrepreneur, which is taxable in their personal taxation.

A written rental agreement should be prepared, and the rental fee must be at market value.

The company can deduct the rental expenses in its taxation, while the entrepreneur must report the rental income in their personal tax return. In this arrangement, costs related to the machinery or equipment (such as fuel expenses) are generally deductible in the company's accounting, and any deductible VAT can also be reclaimed.

If the entrepreneur rents their personal vehicle to the company, the deductibility of expenses must take into account any private use of the vehicle (for example, under a free company car benefit or a company car usage benefit arrangement).

2. Selling the assets to the company

The company may purchase the machinery, equipment, or vehicle from the entrepreneur. In this case, the assets become company property, and the acquisition cost can be recorded in the company's accounts and depreciated for tax purposes.

The sales price received by the entrepreneur is taxable income, and any gain may be taxed as capital income.

The company must ensure that the transaction is carried out at fair market value and properly documented. After the purchase, expenses related to the machinery and vehicles (such as fuel costs) may be deductible in the company's accounting, and VAT may be deductible depending on the circumstances (note the special rules applicable to company car benefits and company car usage benefits).

3. Kilometer allowance

If the entrepreneur uses their personal vehicle for business travel, the company may pay tax-free kilometer allowances in accordance with the Finnish Tax Administration's annual decision.

These reimbursements are deductible expenses for the company and tax-free income for the entrepreneur, provided the applicable conditions are met (for example, the travel has been undertaken for business purposes).

Kilometer allowances must be reported to the Incomes Register using the correct income type.

Under this arrangement, none of the vehicle's expenses (such as fuel costs) are deductible in the company's accounting.