If you are planning to buy or lease a car for your business, the following short article may be important for you.
For your year-end tax return, it makes a difference whether or not you qualify for the KIA, which may provide an additional 28% deductible expense.
Passenger cars and the investment deduction (KIA)
General rule:
A passenger car does not qualify for the investment deduction (KIA) if it is not used for road freight transport or professional transport.
This applies to most standard business passenger cars.
What does “non-professional transport” mean?
Examples include:
- a company passenger car, for example one used by the managing director;
- a leased passenger car;
- a vehicle used for business purposes but not for transport activities, for example travelling to clients.
These vehicles do not qualify for the KIA.
When can the KIA still apply?
You may qualify if the car is used for professional road transport, for example:
- a taxi;
- a courier service;
- a driving school;
- an ambulance or specialised transport.
Important summary
- Standard passenger car: no KIA.
- Vehicle used for professional transport: KIA may apply.
Important additional note
Even if the KIA does not apply:
- the car can still be depreciated;
- the VAT and private-use rules still apply;
- the car can be recorded as a business asset.