Planned changes in VAT deduction on passenger cars!
Flat rate VAT deduction from 1.7.2025
According to the implementing decision of the EU Council, a change in VAT deduction for motor vehicles and motorcycles used for both business and private purposes is planned as of 1 July 2025. The Slovak Republic has asked the European Commission for approval to introduce a flat rate of 50% VAT deduction which will be simpler and less demanding in terms of administration for entrepreneurs. It will be applicable to M1 vehicles and L1e and L3e motorcycles not used exclusively for business purposes.
Under the new rule, a flat rate VAT deduction ratio will apply to the purchase, leasing, import or acquisition of selected passenger motor vehicles and other transactions related to such motor vehicles and accessories (including spare parts and fuel).
Exceptions to the application of the flat rate deduction
The change will neither apply to vehicles used exclusively for business purposes, nor to vehicles and motorcycles purchased for resale, rental or leasing, nor ones used to transport passengers for consideration, including taxis, practice rides in driving schools, or for driver training. Traditional VAT deduction method will continue to apply to such vehicles, which allows VAT to be deducted in full.
Duration of the measure and legislative developments
The authorisation to introduce a flat rate of 50% VAT deduction for selected passenger vehicles should last until 30 June 2028, with the option to extend it upon a further request from the Slovak Republic.
The main aim of these changes is to introduce fairer rules, effectively fight tax evasion and improve tax collection. However, the specific parameters of the measure and the control mechanisms are still to be negotiated in the legislative process.
