VAT deduction for company vehicles – 100% or 50%

These rules apply from January 1, 2026 to June 30, 2028

They may be extended in the future.

1. Standard VAT deduction – 50%

• If an entrepreneur acquires or uses a motor vehicle of category M1, L1e or L3e as a capital asset (not a stock) pursuant to Section 54 paragraph 2 letter a), while the vehicle can also be used by an employee for private purposes, they can deduct only 50% of the VAT.
• The same rule applies if the vehicle is used under a long-term rental agreement, and also for the purchase of services and goods related to the vehicle.
• The use of a vehicle for private purposes is not considered a supply of services or goods for consideration pursuant to Section 8 paragraph 3 and Section 9 paragraph 2 and 3, if the use is for private purposes up to 50%.

2. When can you deduct 100% VAT?

The 50% deduction does not apply if you use the vehicle exclusively for business or if it meets one of the following conditions:

• the vehicle is used in a car rental company (short-term or other rental),
• the vehicle is used to transport people or luggage for a fee (e.g. taxi service),
• the vehicle is a driving school training vehicle,
• the vehicle is a demonstration, test or replacement vehicle for the customer during repairs.

You can also deduct 100% VAT if the vehicle is a capital asset under Section 54 paragraph 2 letter a) and you keep detailed records (a logbook under Section 85n paragraph 6) that prove the exclusive use of the vehicle for business purposes. Detailed information on what the logbook must contain can be found in our article.

3. Obligation to report the vehicle to the tax office

• If you claim a 100% VAT deduction, you must notify the tax office of this fact when filing your tax return for the period in which you claimed the deduction.
• When renting a vehicle under a rental agreement, the notification is made when the VAT deduction is first applied.
• If the method of using the vehicle changes (e.g. from exclusively business to combined use), you must report this change within the tax return filing deadline for the period in which the change occurred.
• The financial directorate publishes the form template and details on its website (Section 85n paragraph 9).

4. Adjustment of deducted tax and special situations

• When deducting VAT under these rules, the adjustment of the deducted tax (Section 54d) does not apply, unless special situations arise, e.g. sale of the vehicle or commencement of exclusive use (Section 52a paragraph 2 letter a)).
• If you start using the vehicle exclusively for business purposes, you must keep a logbook (Section 85n paragraph 6) that proves that the vehicle is used only for business purposes.

Why is this important?

• Correctly applying the VAT deduction will save you money.
• The obligation to prove the actual use of the vehicle during a tax audit lies with the taxpayer.
• It allows you to fully use a company vehicle without the risk of additional tax payments.