Company Cars – What Changes from 2026?

Newsletter – 28.10.2025

Dear clients and partners,

From 2026, significant changes to VAT related to the purchase, lease, and operation of passenger vehicles will come into effect, as previously announced in early June. These changes stem from an exemption granted by the European Commission to Slovakia that limits VAT deductions for passenger cars and motorcycles. If your company uses vehicles, these updates may directly affect you.

What’s new?

For passenger vehicles and motorcycles used partly for non-business purposes, it will no longer be possible to deduct VAT proportionally based on actual usage. Instead, a flat-rate VAT deduction of 50% will apply. This new rule will cover passenger vehicles and motorcycles (categories M1, L1e, and L3e) acquired as investment property or leased between January 1, 2026, and June 30, 2028, inclusive.

It also applies to repairs and fuel

The new restrictions will not only affect the purchase or lease of passenger vehicles and motorcycles, but also their operating costs, such as:

Repairs and spare parts
Fuel
Services (e.g. tire service, car wash, highway tolls, etc.)

For these related expenses, VAT payers using passenger vehicles and motorcycles for both business and non-business purposes must apply the 50% flat-rate VAT deduction, even for vehicles and motorcycles acquired or leased before January 1, 2026. The current option to deduct VAT on fuel purchases up to 80% will be abolished.

When does it not apply?

The flat-rate VAT deduction restriction does not apply to passenger vehicles and motorcycles intended for:

Resale
Rental,
Passenger transport including taxi services,
Driving schools,
Demonstration or testing purposes,
Replacement vehicles under service
Vehicles used exclusively for business purposes.

The new rule also does not apply to trucks, buses, special vehicles, and other vehicles outside categories M1, L1e, and L3e.

New obligations

If you claim a 100% VAT deduction, you will be required to:

Maintain electronic trip records proving that the vehicle is used exclusively for business purposes. They must include detailed data about the vehicle and each trip. The records must be electronically archived and submitted to the tax authority upon request. (This obligation does not apply to vehicles used for the special purposes mentioned above).
Notify the tax autoritiy that the vehicle is not subject to the flat-rate restriction. The Financial Directorate of the Slovak Republic will publish a special notification form for this purpose.

VAT that is not deducted under the new rules cannot be claimed as a tax-deductible expense for income tax purposes. While the VAT changes currently have no direct impact on income tax, further legislative amendments are expected.

Why is this important?

These changes will increase your costs or administrative complexity for many businesses. We recommend reviewing your company’s policy on providing vehicles for private use and employee benefits.

If you would like to learn more about how to optimize company benefits, we have a “Benefit Flyer” available for our clients — we will be happy to provide it upon request.

Want to know more? Contact us – our experts will be happy to provide in-depth guidance and tailored advice.

We are preparing for you:

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