Company motor vehicles are experiencing a shock from the VAT change.
Exemption for the Slovak Republic and changes to the VAT Act
As we informed you in the previous edition, the Slovak Republic has requested an exemption from the European Commission to limit the deduction of VAT on the purchase, lease, acquisition from another EU Member State and import of M1, L1e and L3e categories of motor vehicles (“passenger motor vehicles”) used for purposes other than business (e.g. private use by employees).
On the basis of this exception , the provisions of Act No. 222/2004 Coll. on Value Added Tax (hereinafter the “VAT Act”) were amended by Act No. 261/2025 Coll., amending and supplementing certain Acts in connection with the consolidation of public finances, which has already been published in the Collection of Laws of the Slovak Republic.
New rules for VAT deduction on passenger cars from 2026
According to the new provision of the VAT Act, in case of passenger motor vehicles not used exclusively for business purposes, with a purchase price excluding tax of more than EUR 1,700 and acquired from 1 January 2026 to 30 June 2028 (inclusive) the right to deduct input VAT from the purchase price of the vehicle may be applied only to the extent of 50%. This provision will also apply to passenger motor vehicles acquired by a taxpayer from 1 January 2026 to 30 June 2028 on the basis of a finance lease agreement.
The limited VAT deduction of 50%
The limited VAT deduction of 50% will also apply to:
- the use of a passenger motor vehicle under a lease or similar contract (e.g. an operating lease, except for short-term lease); and
- the purchase of goods and services supplied to the taxpayer in connection with the use of those passenger motor vehicles (e.g. spare parts, fuel, garage services).
Exceptions to limited VAT deduction
The limited right to deduct tax will not apply (subject to compliance with the notification requirement) to a passenger l motor vehicle acquired or used by the taxpayer exclusively for business purposes, which is:
- short-term lease or other than short-term lease of a passenger motor vehicle,
- transport of persons and their luggage for a consideration, including taxi service,
- the operation of a driving school if it is a training vehicle, or
- used by the taxpayer as a demonstration, test or as a replacement passenger motor vehicle.
Also, the limited right to deduct VAT will not apply to a passenger motor vehicle acquired by a taxpayer as a capital asset exclusively for business purposes or used exclusively for business purposes in compliance with the notification and detailed registration obligation.
Record-keeping obligations of VAT payers
For the purpose of proving the use of the motor vehicle, including the purchase of related goods and services, exclusively for business purposes, the payer will be obliged to keep detailed evidence and records in electronic form, which must be made available to the tax authority upon their request.
Act No. 595/2003 Coll. on Income Tax was also amended in connection with the change of rules for VAT deduction on the purchase of passenger motor vehicles, according to which this irrecoverable VAT will not be considered as a tax-deductible expense.
As this change is currently associated with a number of uncertainties and unanswered questions, a further amendment of the legislation is expected to resolve these uncertainties. We will, of course, keep you informed of any amendments in this regard.
