Tax and deductions for car peer rental – this is how it works

Taxation and deductions for car peer rental are subject to capital duty. Capital income is taxed progressively. The capital tax rate is 30% and for taxable capital gains exceeding EUR 30,000 34%. Taxable capital income is determined on the basis of gross income and deductions. Capital income can be deducted from, among other things, expenses incurred in obtaining and maintaining income and interest on earning income.

Order full-year rental income statement from BloxCar at contact@bloxcar.fi. You can copy the information to your tax return from the full-year rental income statement. There may be a delay in generating statements from time to time, so stay on time. BloxCar normally always sends a rental income statement to the car owner before the rental income is accounted for. The price of the full-year From the full-year rental income statement is 9.95 euros.

Taxable rental income is calculated by deducting the related service fees, income generation costs and car depreciation from the gross rental income. The amount of depreciation is 25 percent of the residual cost, i.e. the non-depreciable purchase price of the car, from which the deductible amount is calculated. According to the instructions of the tax administration, the acquisition cost of a car, i.e. depreciation, may not be deducted at all if the property is not primarily used for rental purposes or for other activities intended to generate income. The tax administration assesses on a case-by-case basis the main use of the property: whether it is for private use or for income-generating activities. It is assumed below that the car is not primarily for rental use, as this is the most common situation.

The deductible amount of the car’s overheads, such as insurance, corresponds to the proportion of the car that has been used for rental. In order to find out about this, the use of a car must be kept in a logbook, at least for rental use, in order to find out the ratio of the number of rental kilometers driven by a car during a calendar year to the total number of kilometers driven during the calendar year. Expenses directly related to the rental, such as service fees, are fully deductible.

The deductions are based on the amount of VAT on the costs if the lessee is not liable for VAT on the leasing business or has not otherwise been able to deduct VAT on the costs or the acquisition cost on which the depreciation is based. For income tax purposes, the deduction is based on the amount exclusive of VAT if the owner of the car is liable for VAT on the rental activity and makes the deduction for VAT purposes.

Example – person X rents his own car through BloxCar

Person X owns a car with a purchase price of 30 000 €, including VAT, because X has not declared himself liable for VAT on the car rental business. He starts renting his car through BloxCar. The total mileage of the car is 28,000 km in the first year. The share of rentals is 6,000 km. Because the car is not registered for professional use, i.e the car is also in private use, X cannot deduct the purchase price of the car in its taxation, i.e. it cannot depreciate the purchase price of the car.

There are other expenses in the car like maintenance, inspection and washing costs. Total expenses are 1,300 euros, including VAT. The deductible amount is 6,000 km / 28,000 km x 1,300 € or 279 €.

X has received rental income from the car exactly 4000 €. The service fees charged to X total 1 200 €. Taxable rental income is 4 000 € –  1 200 € –  1 607 € –  279 € =  914 €.

This is how the taxpayer is notified of the car’s peer rental

It is easy to do taxing and deducting through OmaVero.

X must declare the rental income of other assets in the tax return (in OmaVero or on form 7L). The tax return must state both the amount of gross rent and the deductible amounts of expenses and depreciation. Depreciation must be calculated on the tax return, which can be done in OmaVero or on form 7L.

X has taken out a loan to purchase a car and paid 200 € in interest on the loan in the tax year in question. He can claim an amount equal to the interest on the rental activity to be deducted as interest on the income-generating debt, i.e. 6 000 € / 28 000 € x 200 €, ie EUR 43 (in OmaVero or on form 50B).

Go to the taxpayer page from this link.

VAT liability in car peer rental

Car rental is subject to VAT when the activity is carried out in the form of business and the rental income from the activity exceeds 15 000 € per year. It is likely that a rental in the form of a business would require a person to rent more cars on a regular basis. If the leasing activity is carried out as a taxable person, the lessee must register for VAT.

If the rental activity is subject to VAT, the costs are deductible. To the extent that the costs also apply to the private use of the car renter, there is no right to deduct.

Expenditure shall be allocated to the deductible part of the rental use and to the non-deductible private use on the basis of the allocation that best describes the distribution of costs. One of the best ways is to calculate the ratio of kilometers driven for rental and private use. In the example, the ratio is 6 000: 28 000.

The right to deduct VAT included in the purchase price or leasing fee of a car must be assessed on a case-by-case basis according to the purpose of the car. If the car is used in a rental business subject to VAT, VAT must also be paid on the sale price of the car to the extent that it has been used in a taxable business.

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