Car expenses in Finland: deductions, mileage allowances and VAT

Client visits, collecting supplies, travelling between job sites: a car can be essential to running your business, even when you also use it for the family shopping. So how do you divide the costs?

The answer depends on your business structure, how you use the car, and whether you are dealing with income tax or VAT. Owning the car privately does not automatically rule out deductions. Equally, putting it in the company’s name does not turn every journey into business travel.

This guide covers the most common situations for sole traders in Finland, along with the differences for limited companies and partnerships. The distances and costs in the examples are illustrative. Mileage calculations use the basic rate for 2026.

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Contents

1. How can you deduct car expenses?
2. The 50% rule for sole traders
3. Which journeys count as business travel?
4. What to record in your mileage log
5. Actual costs and depreciation
6. The additional deduction for a private car
7. VAT on passenger cars and vans
8. Cars in limited companies and partnerships
9. Common questions about car expenses
10. Keeping your records in order

1. How can you deduct car expenses?

There are three common starting points:

A sole trader cannot pay themselves a tax-free mileage allowance. Instead, they claim a tax deduction. A limited company is a separate legal entity and can pay allowances to a shareholder who works for it. The Finnish Tax Administration’s guidance on mileage allowances also explains this distinction.

A deduction reduces your taxable income. A €1,000 deduction does not mean you receive €1,000 back in tax. Our guide to advance tax for sole traders explains how deductions affect your estimated profit.

2. The 50% rule for sole traders

For a sole trader, the way car expenses are deducted depends on the business kilometres as a share of the total distance driven during the tax year:

• More than 50% business use: deductions are based on actual car expenses. You cannot also claim the private-car additional deduction for the same car.
• 50% or less business use: the car is treated as a private asset when assessing eligibility for the additional deduction. Exactly 50% falls into this category too.

You cannot simply choose whichever method produces a larger deduction. The Tax Administration’s vehicle-expense guidance bases the treatment on actual use.

A temporary change in use does not automatically mean that the car must be added to, or removed from, the business’s net assets. That is a separate assessment: one year’s mileage split does not settle every question about the car’s asset classification. See section 7 of the detailed travel-expense guidance (in Finnish).

3. Which journeys count as business travel?

Business journeys include visiting clients, collecting supplies for a job and travelling between business premises.

Your normal journey from home to your permanent business premises is private travel. Any deduction for that commute is handled in your personal taxation under the rules for travel between home and work.

The purpose of the journey matters. If you run a personal errand during a work trip, record that part separately. Driving during working hours does not make the entire route business travel. The Tax Administration’s vehicle-expense guidance explains the distinction.

4. What to record in your mileage log

For each business journey, record:

• departure and return times
• the starting point, destination and route where needed
• odometer readings at the start and end, and the distance travelled
• the purpose of the journey and who drove the car.

You also need the total distance driven over the year. The information required by the Tax Administration can be kept in a mileage log or another reliable record.

A useful entry will still make sense months later. Write “installing a client’s network equipment, Espoo” instead of just “work trip”. Update the log on the day, so you do not have to reconstruct your journeys when it is time to file your tax return.

Keep the receipts too. A mileage log shows how you used the car; a receipt shows what you paid for.

5. Actual costs and depreciation

For a car treated as a business asset, deductions are based on actual costs. These include fuel or charging, servicing, tyres, insurance and vehicle tax. Your mileage records establish the business share.

The purchase price is normally deducted over several years through depreciation. The standard annual tax depreciation for movable fixed assets is up to 25% of the remaining undepreciated cost. This is a declining-balance calculation, not 25% of the original purchase price every year. Read the Tax Administration’s depreciation guidance for details.

Example: 65% business use

You drive 20,000 kilometres during the year, including 13,000 business kilometres. Car expenses and depreciation for the tax year total €8,000. Any deductible VAT has already been taken into account in that amount.

• Business share: 13,000 / 20,000 = 65%.
• Deduction for income tax: €8,000 × 65% = €5,200.
• Private-use share: €2,800.

If the full €8,000 has been deducted in your accounts, add back the €2,800 private-use share on the tax return. If your accounts already include only the business share as an expense, do not add the private share back a second time. The instructions for a sole trader’s tax return explain the adjustment.

6. The additional deduction for a private car

A sole trader using their own private car for business may qualify for an additional deduction (lisävähennys). In 2026, the basic calculation uses €0.55 per kilometre, provided the deduction’s conditions are met. This follows the Tax Administration’s mileage allowance rate for 2026.

The additional deduction tops up expenses already deducted. You cannot claim the full mileage-based amount and then deduct all the actual car expenses for the same journeys on top of it.

Example: 7,000 business kilometres

In the 2026 calendar year, you drive your own car for 20,000 kilometres, of which 7,000 are for business. Business use is 35%, so the car is treated as a private asset in this example. The journeys are documented and have incurred costs for you.

The basic mileage calculation is:

7,000 km × €0.55/km = €3,850.

If you have already deducted €2,800 of expenses for these business journeys in your accounts, the additional deduction is €1,050. The total deduction is €3,850. If no expenses have been deducted yet, you can claim the full €3,850 as an additional deduction.

If your actual deductible expenses exceed the mileage-based amount, deduct the actual expenses without an additional deduction. The additional deduction is claimed on the business tax return. The detailed guidance (in Finnish) covers the conditions and different calculations.

For journeys in other years, use the rate for the relevant tax year. Our guide to travel allowances in 2026 covers mileage supplements and per diem allowances.

7. VAT on passenger cars and vans

Deducting an expense for income tax and reclaiming VAT are separate matters. Treating a car as a business asset does not, by itself, entitle you to deduct its VAT.

For an ordinary passenger car, even a small amount of private use generally prevents any VAT deduction. This applies to both the purchase and running costs. For example, 80% business use does not automatically entitle you to deduct 80% of a passenger car’s VAT.

VAT can be deducted when the passenger car is used exclusively for activities that qualify for VAT deductions, and you can demonstrate this. Special rules apply to activities such as taxi services, car rental and driving instruction.

For a van, VAT is deductible in proportion to its use for eligible activities. If 70% of its use relates to VAT-taxable business and 30% is private, the deductible VAT share is generally 70%. This requires, among other things, that the business is liable for VAT and that the purchase includes deductible VAT.

See the Tax Administration’s guidance on vehicle VAT for the rules and exceptions. Check the vehicle’s registered category and intended use before buying it.

Planning to buy a car for your business? Contact Bisse.fi to discuss the bookkeeping arrangements before you decide.

8. Cars in limited companies and partnerships

Using your own car while working for a limited company

A Finnish limited company (osakeyhtiö, Oy) can pay tax-free mileage allowances to a shareholder who works for it and uses their own car for business travel. This is possible even without a cash salary, provided both the journey and the allowance meet the tax-exemption conditions. A travel expense claim is required for the company’s records. Ordinary commuting between home and work does not qualify on this basis.

At the basic 2026 rate, a qualifying 200-kilometre business trip can be reimbursed tax-free up to €110. See the Tax Administration’s mileage-allowance guidance for the conditions.

Private use of a company car

If a shareholder working for the company, or their family, uses the company’s passenger car or van privately, this generally creates a taxable car benefit (autoetu). It must be handled through payroll and reported to the Incomes Register. Registering the car in the company’s name does not remove the tax consequences of private use.

With an unlimited car benefit, the employer pays all the car’s costs. With a limited car benefit, the user pays at least the fuel or other energy costs. See the Tax Administration’s explanation of car benefits.

VAT on a company car must still be assessed separately using the rules in the previous section. For help with your company’s finances, explore Bisse.fi’s limited company service.

General and limited partnerships

A partner working in a general partnership (avoin yhtiö, Ay) or limited partnership (kommandiittiyhtiö, Ky) can receive qualifying travel allowances for using their own car. Private use of a partnership’s car is handled either as a properly reported car benefit or as a private withdrawal. In the latter case, the private-use expenses are not deductible by the partnership. See the guidance on partners’ travel expenses (in Finnish).

9. Common questions about car expenses

Can a sole trader claim the additional deduction for a leased car?

A rental-type lease does not qualify for the ownership-based private-car additional deduction. Actual expenses for business journeys may still be deductible if the conditions are met. Check the type of contract: renting a car and buying it under a hire-purchase agreement that leads to ownership are different arrangements. Section 6 of the detailed travel-expense guidance (in Finnish) covers this distinction.

What about a motorcycle or another vehicle?

The sole trader’s private-car additional deduction applies to cars. For business use of another privately owned vehicle, deductions are based on actual expenses. Employee mileage-allowance rates for other vehicles cannot simply be used as a sole trader’s additional deduction. See section 5 of the Tax Administration’s guidance (in Finnish).

Can I deduct electric-car charging costs?

Electricity used to charge a car for business journeys is a running cost, just like fuel. If you charge at home, keep reliable records of the electricity used for charging and its price. You cannot book your entire household electricity bill as a car expense. The passenger-car VAT restriction also applies to charging electricity; an electric powertrain does not change the rule. See the vehicle VAT guidance.

10. Keeping your records in order

Make car expenses part of your monthly bookkeeping routine:

1. Record business journeys and keep track of the car’s total mileage.
2. Save receipts and identify which car they relate to.
3. Separate private and business use, and check VAT treatment independently.
4. Give your bookkeeper the purchase or lease agreement too.
5. At year-end, check how expenses and any additional deduction have been accounted for. Each expense is deducted only once.

Remember to factor the real cost of using your car into your prices. If client visits involve substantial driving time and mileage, the time spent at the client’s premises does not reflect the full cost of the job. Use our hourly rate calculator (in Finnish) to explore pricing based on your costs.

This rewritten edition was published on 25 September 2026. The original article was published on 22 May 2025. The Tax Administration’s guidance and the 2026 figures used in the examples were checked as part of this update.

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