You’ve just started your own company, and you’ve discovered that you can deduct business expenses to reduce your taxable income. A smart move, because who wants to pay more taxes than necessary? So you would also like to bring in your egw and internet expenses. But there is one problem: you have paid many of these costs from your private account. Is that even possible? Let’s unravel that mystery!
Are you paying business expenses from your private account? No worries!
Good news! It’s not a problem at all to pay business expenses with your private account. If you are a sole proprietor, you can freely transfer money between your different accounts.
Whether you pay your internet, electricity or water bill, it doesn’t matter which account it comes from, as long as you can prove that you paid.
Tip from an accounting expert:
For utility costs, the taxman usually agrees to a business percentage of 20%
When does a private account become a business account?
Here comes the interesting part: in sole proprietors, there is no official difference between your business account and your private account. As soon as you make even one payment from one of those accounts for business purposes, that account is considered a business account. This means that the tax authorities may look into it during a tax audit.
Do you make a business expense? Then you may pay it with any account: your private account, the family account, a professional account, the joint account…
❗But as soon as you pay with a particular account, the tax authorities may also look into that account. This may not be a big issue, but in terms of privacy, it is important to know.
The three conditions for deducting expenses
To deduct expenses, you need to meet three simple conditions:
1️⃣ Proof of purchase: you need an invoice, receipt or other proof of purchase.
2️⃣ Proof of payment: show that you have actually paid, whether from your own bank account or a joint account.
3️⃣ Proven business benefit: You must be able to show that the cost will help your company move forward. So costs for a workspace with light, internet and insurance can easily be brought in.
Do utility costs meet these conditions?
So imagine you do your freelance work at home, then you are guaranteed to be able to bring in (part of) your electricity, water, internet and gas bills.
After all, of these costs you have 1️⃣ proof of purchases, 2️⃣ proof of payments, and 3️⃣ proven business use.
You will need the internet for your company, and your workspace is also essential. That space also needs light, internet, insurance… otherwise you won’t be able to work. So this is enough to bring in those costs.
Useful, but don’t expect miracles
Now that you know that you can bring in all these costs, you are naturally questioning exactly how this will affect your accounts?
Utility costs are very interesting costs, because you have to pay them anyway and they have a positive effect on your accounts.
Don’t expect miracles from them, though, because you can only enter the professional use percentage! If your monthly electricity bill is 200 euros, of which 20% is professional use %, that’s only 40 euros per month. So on an annual basis (12 months) you will have 480 euros extra in professional costs.
Tip:
Don’t forget to bring in your fire insurance too
The example from Lies
Lies is a lawyer and rents a flat. Exactly how much does she benefit from bringing in her utility costs?
| Electricity | €200 | 20% | €40 |
| Water | €30 | 20% | €6 |
| Internet | €50 | 70% | €35 |
| fire insurance | €15 | 20% | €3 |
| Totaal | €84 | ||
So in this example, Lies can put in €84 every month, on an annual basis she has about €1,000 in extra expenses. Which gives her a tax benefit of about €500.
So shouldn’t my company number be on my electricity bill?
Just want to bring in the cost? Then any document will do. So an electricity bill in the name of your partner and you is fine. That is enough to bring in as an expense.
Do you also want to recover the vAT? Then you do need an invoice with your company number on it. As a company subject to VAT, it is therefore best to question invoices. Payments still play no role in this case either, so you can feel free to pay the bill from the joint account.
Did you know.
Do you want to recover VAT from your Internet account? Then you do need to question an invoice with your company number on it.
We are both self-employed, can we both contribute the EGW?
You can both contribute the EGW for your sole proprietors, if your professional use justifies it. Since the tax authorities accept 20% business use, you can therefore both contribute the invoice for 20%.
The same principle applies to the internet bill, fire insurance, phone bill….
The only problem here is to recover the vAT. Only one person will be able to recover the vAT because only one company number can state the invoice.
So it is enough to have an invoice or receipt that states both names. You can then both contribute the cost. If you also want to reclaim vAT, you should always make sure the invoice shows your company number.
Time to bring in those charges!
The mystery is solved! You can deduct business expenses from your private account, as long as you meet the conditions and can prove business usefulness. It’s a smart way to reduce your taxable income, even though the savings may not be huge. And if you are joint entrepreneurs with your partner, you can both contribute the expenses.
So, feel free to pay those bills, whether from your private or joint account, and don’t forget to enter the required proofs in Dexxter for your tax return!
Did you know?
Dexxter can remind you to bring in these costs monthly
