VAT and the Private Use of a Company Van
Loodgietersbedrijf Peeters BV is a VAT-registered plumbing business in Belgium. It buys a delivery van for €36,300 including 21% VAT and uses it partly for private trips by the owner. The accountant estimates private use at 30% based on a mileage log. The van is also used for exempt activities for a small part: about 10% of turnover comes from services that are VAT-exempt. Peeters deducts the full VAT on the van in its periodic return. The VAT inspector opens a check and questions both the private use and the exempt-use proportion. Peeters argues that because the van is a business asset and the private use is modest, no correction is needed. There is also a question about whether the private use should be charged through as a benefit in kind for the owner's personal income tax.
1. How much input VAT may Peeters deduct on the van, and how should the private use and exempt-use proportion be handled?
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The VAT on the van is €36,300 × 21/121 = €6,300. Input VAT is deductible only to the extent the asset is used for taxable business activity. Private use is not a taxable business use, so roughly 30% is excluded. The exempt turnover also limits the right to deduct, so the exempt proportion (about 10%) must be excluded as well. A reasonable approach is to start from the business share of 70% and then apply the taxable proportion within it, giving a deductible amount of about €6,300 × 0.70 × 0.90 ≈ €3,969, with the balance of about €2,331 corrected. The exact method depends on the applicable national rules and the regularisation scheme for mixed-use assets, but deducting 100% up front is clearly wrong. Peeters must correct the return and may face interest and a penalty.
2. Does the private use trigger a separate VAT charge, and how does it interact with the owner's personal income tax?
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Yes. Private use of a business asset is generally treated as a deemed supply of services for VAT, charged on the cost of the private use, unless the input VAT on that use was never deducted. Because Peeters is now correcting the deduction by excluding the private share, the two mechanisms must not be applied twice: either the VAT on the private share is not deducted, or a deemed-supply charge is made, but not both for the same use. For personal income tax, the private use of a company van by the owner is a benefit in kind that must be added to the owner's taxable income, valued under the applicable lump-sum or actual-cost rules. The VAT correction and the benefit-in-kind valuation are separate obligations and both must be addressed.
3. What practical documentation should Peeters keep to support its position, and what is the risk if it does not?
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Peeters should keep a mileage log distinguishing business, private, and exempt-use trips, the purchase invoice, and a calculation showing how the deductible proportion was derived. Without this, the inspector may apply the most unfavourable proportion or disallow the deduction entirely, and the burden of proof effectively shifts to the taxpayer. Good documentation also supports the benefit-in-kind valuation. The risk is a revised assessment, interest, and a penalty, plus a possible challenge to the exempt-use proportion if turnover records are unclear.