Reduction of VAT Deduction on Motor Vehicles: A Change That Will Impact Entrepreneurs

The Ministry of Finance highlights examples where entrepreneurs unlawfully deducted VAT on the purchase of vehicles, fuel, and maintenance costs, even though these vehicles were not used for business purposes. In some cases, companies owned several luxury vehicles used exclusively for private purposes by family members of the company owner. This type of abuse leads to a loss of VAT and corporate income tax revenues.

As of July 2025, it will only be possible to deduct 50% of the VAT on the purchase of passenger vehicles, fuel, and maintenance and repair services, if the vehicles are also used for private purposes. This system will introduce a flat 50% VAT deduction, which is already in place in 11 EU countries and has been positively received by business associations. According to a survey, 70% of entrepreneurs stated they would welcome a simpler tax system and greater legal certainty.

After the Council’s decision, the Slovak Republic will have the option to implement this restriction, without taxing private use of motor vehicles in the following cases:

• Leasing, intra-Community acquisition or import of motor vehicles (category M1), motorcycles (categories L1e and L3e) that are not used exclusively for business purposes,
• Supply of services, spare parts, accessories, and fuel intended for such vehicles.

This new system does not apply to vehicles used for:

• Resale, rental, or leasing,
• Passenger transport for consideration, including taxi services,
• Driving instruction at driving schools,
• Driver training,
• Replacement vehicles while others are under repair.

Similar exceptions have already been granted to other EU countries such as Estonia, Italy, Hungary, and Poland. This new regime will be valid until June 30th 2028, and may be extended upon request.

What Does This Mean for Entrepreneurs?

Entrepreneurs who currently benefit from full VAT deduction will need to adapt to the new rules effective from July 1st 2025. This system will impact vehicle acquisition and operating costs, which may increase by more than 10%. These changes are in line with the European Commission’s initiatives and the objective of simplifying tax processes across the EU.