As a limited company entrepreneur, you can decide whether the car is in the entrepreneur's own name or in your company's name. Evaluating the matter is not simple and it depends, among other things, on the number of work trips, the need to use the car also for private trips, and of course also the company's expense structure.
Vehicle in own name
When the car is in your own name, you can invoice your company for tax-free kilometer expenses of 53 cents per kilometer (2023) for trips included in working hours. At the same time, while the kilometer expenses are tax-free income for you personally, they are a tax-deductible expense for your company.
Of course, it is worth noting that since the car is in your own name, you cannot deduct other costs from your company for the car in your company's taxation. It is also important to remember to fill out the travel document, where you itemize the kilometers driven. For this you can use, for example, the basis provided by UKKO services.
Kilometer reimbursements only apply to work trips, which means a trip made within the scope of work, such as traveling to a customer. However, journeys from home to the workplace and back are not classified as work trips - you can deduct these expenses on your personal tax return.
In the name of the company
You can also decide that your car is the property of your limited company. Therefore, all costs arising from the work use of the car are deductible costs for your company, and the purchase price of the car can be deducted as depreciation, with a maximum annual depreciation of 25 percent.
It is important for a limited company entrepreneur to understand that if the car in the company's name is also used for private driving, i.e., for the entrepreneur's own expenses, a car advantage is always formed from a tax point of view. The tax assessor makes a presumption that the car is used for private driving, if the entrepreneur does not have another vehicle at his disposal in addition to the company car, or if it is not a vehicle intended for professional use.
Car benefit means a taxable benefit arising from the use of a vehicle in the company's name for private driving. The car benefit is part of the salary paid to the recipient and withholding and incidental expenses are paid for it in the same way as for the actual salary.
A car benefit can be a free car benefit or a use benefit. The free car benefit means that the company pays all the costs of using the car. The user benefit, on the other hand, means that the private car entrepreneur or other owner of the user benefit pays at least the car's fuel costs.
When an entrepreneur evaluates which of the car benefits is a better option for them, they can make use of the car benefits calculator found on the website of the Tax Administration's vero.fi website.
One option for a limited company is also the so-called car-leasing, where you rent a car long-term in the name of your company. Rents are deductible costs in your company's taxation, but the leasing assets are not on the balance sheet.
How should you act?
Taking a vehicle in the company's name or keeping it in private ownership is a complex question to which no universal answer can be given. In evaluating the matter, however, it can be said that if the costs of the car are relatively low and the number of work trips is high, it may be profitable to keep the car in your own name and pay yourself tax-free kilometer expenses.
However, if the drives are more classified as private drives, the free car benefit can be profitable, if the company's cost structure can handle it. Vehicles in professional use are also recommended to be transferred to the name of the company.