Car in the business or in your own name? The 50 % rule in Finland
For a sole trader (toiminimi) in Finland, the kilometres decide. A car belongs to the business when it was acquired for business use and more than 50 % of the year's kilometres are business driving. Then its costs and depreciation are business costs, and the private share is added back to your income. At 50 % or less it stays a private car, and you deduct the business trips instead. Either way you need a driver's log, and a passenger car with any private use gives no VAT deduction at all.
The two options
| Private car, business use 50 % or less | Business car, business use over 50 % | |
|---|---|---|
| In the books | not an asset of the business | an asset of the business |
| What you deduct | the business kilometres at 0.55 €/km in 2026, less car costs already booked | all running costs, plus depreciation of up to 25 % a year of the remaining value |
| Private driving | your own business | its share of the costs is added back to your business income |
| VAT on the car and running costs (passenger car) | no deduction | no deduction if there is any private use |
| VAT on a van | by business share | by business share |
A private car used for business
Most toiminimi entrepreneurs keep the car private. You record the actual business costs, such as fuel for a business trip, in the books. On the tax return you then claim an additional deduction: the business kilometres at the 2026 rate of 0.55 euros a kilometre, less the car costs already in your books. Trips between home and your permanent place of business count as private. The full rules and a worked example are in our article on mileage and per diems.
A car in the business
If the business share is over 50 %, the car is a business asset. Its fuel, insurance, repairs and tax are business costs, and its cost is depreciated: each year you can deduct up to 25 % of the value not yet depreciated. The private driving still has to be accounted for: its share of the costs, depreciation included, is added back to your business income. With a log showing 30 000 kilometres of which 10 000 were private, a third of the car costs is added back to your taxable business income.
The VAT trap
The VAT rules are stricter than the income tax rules. For a passenger car, even slight private use removes the whole VAT deduction, on the purchase and on the running costs. The exceptions are cars bought for resale, rental, professional passenger transport or driving instruction. For a van and larger vehicles, the VAT is deductible in proportion to business use. So a van used mainly for the business is often the better buy for a business that needs one. See VAT rates in 2026.
The driver's log
Whichever option you choose, keep a driver's log. For each business trip it shows the start and end time, where it started and ended (and the route when needed), the kilometres, the purpose, the odometer readings and the driver. It also shows the car's total kilometres for the year: without that figure there is no 50 % test and no additional deduction.
In a limited company
An Oy that owns a car and lets you drive it privately gives you a taxable car benefit: a fringe benefit taxed like salary and reported to the Incomes Register. The alternative is to keep the car in your own name and have the Oy pay you tax-free mileage allowance for business trips. See our article on mileage and per diems and the toiminimi or Oy comparison.
If you want an accounting company in Finland to check the log and claim the right deduction every year, it is part of our monthly fee.
Sources
- Tax Administration: vehicle expenses of a self-employed person
- Tax Administration: vehicles in VAT (in Finnish)
- Tax Administration: income source transfers and private use, detailed guidance (in Finnish)
Please note: this is general information about Finnish rules, not advice for your own situation, and the rules change. Ask us before you act on it.
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Karma Accounts is an accounting company in Finland for sole traders and small companies. We keep the bookkeeping current and file on time, and you get the amount before the due date.
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