Leasing a car for your business requires careful accounting to ensure it’s properly recorded, especially for tax reporting. With Accountable, the process is simple and efficient. This guide walks you through the steps to correctly encode a car financial lease.
There are different ways to encode a vehicle, depending on how it was acquired: full purchase, financial lease, or rental. Each option has its own conditions and method of encoding in Accountable.
In this article, we focus on how to encode a financial lease for a car.
Not sure which situation applies to you? Feel free to reach out to our tax team with your documents, and we’ll help you determine the correct approach.
Want to understand the differences between leasing, renting, and buying? Read our full comparison here: Leasing, renting or buying a car: which is the best option?🚗💼
Leasing a vehicle? 🚘
Financial leasing is a financing option where a leasing company acquires an asset and makes it available to the lessee, who can use it but does not legally own it. The asset is recorded on the lessee's balance sheet, allowing for depreciation over time.
Payments reduce the debt, with each invoice separating the principal and interest for clear asset management.
At the end of the lease, there is typically a purchase option for up to 15% of the asset’s value.
For VAT, payments are spread across the lease term, easing the financial burden compared to direct purchases, with partial recovery through VAT returns.
Financial leasing provides flexibility by allowing asset usage without significant upfront costs, and a potential acquisition option at the end.
How to encode financial leasing for a vehicle?📝
1. Record the Initial leasing contract 📄:
Create a new expense -> Upload your contract
Go to Vehicle > Automobile > Financial Leasing Contract.
Enter the leasing contract details, ensuring you input the car’s total value excluding VAT. This will allow you to amortise the car’s value over time.
2. Record monthly leasing invoices 💵:
For each monthly invoice, go to vehicle > Automobile > Financial leasing monthly invoice.
Only record the amount corresponding to the capital repayment.
The VAT portion of the invoice will be partially deductible.
3. Record the purchase option (if applicable) 🛒:
If you decide to exercise the purchase option at the end of the lease, record the final invoice under "Car purchase".
⚠️ Don’t confuse a regular car with a professional-use vehicle. A regular car is typically used for both personal and business purposes, which limits how much of the cost and VAT can be deducted.
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How to encode financial leasing for a utility vehicle in Accountable? 🚚
1. Record the Initial leasing contract 📄:
Go to vehicle > Utility vehicle > Financial leasing contract.
Enter the leasing contract details, ensuring that you input the total vehicle value excluding VAT. This allows the utility vehicle’s value to be amortised over time.
⚠️ Please note that the utility vehicle should be used 100% for professional purposes. If it is not used 100% for professional purposes, it must be recorded as a normal vehicle.
2. Record monthly leasing invoices 💵:
For each monthly invoice, go to vehicle > Utility vehicle > Financial leasing monthly invoice.
Only record the amount that corresponds to the capital repayment.
The VAT portion of the invoice will be 100% deductible.
3. Record the purchase option (if applicable) 🛒:
If you decide to exercise the purchase option at the end of the lease, record the final invoice under "Utility vehicle purchase".
⚠️ Be careful not to confuse a utility vehicle with a standard car. Even if a regular car is used for work, personal use reduces its deductibility. Only vehicles designed purely for professional use, like those shown in the example below, qualify as utility vehicles.
See picture ⬇️⬇️⬇️
