๐ข Starting July 1, 2025, company cars used partly for private purposes will become less tax-efficient – Slovakia plans to reduce the VAT deduction to 50%.
๐ What’s changing?
The European Commission has approved Slovakia’s request to limit VAT deductions on passenger vehicles used for mixed (business and private) purposes. Businesses will be able to deduct only 50% of the VAT. This measure is expected to take effect from July 1, 2025.
While this is currently only a decision by the EU Council, Slovakia must still adopt the corresponding amendment to its VAT Act. Nonetheless, the impact is already clear.
โ Who will be affected and what should you do?
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All businesses that purchase or operate company vehicles that are also used for private purposes (by employees, executives, or shareholders).
- In practice, this means a reduced tax benefit worth hundreds or even thousands of euros per vehicle purchase and use (e.g., fuel, maintenance).
- The measure will apply only to vehicles acquired after July 1, 2025, not retroactively.
- It is still unclear how “private use” will be assessed – further clarification is expected in the upcoming national legislation.
๐ What can you do today?
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Reassess your fleet investment plans – be aware of the reduced VAT deduction for purchases or leases starting July 2025.
- Consider updating internal vehicle use policies – if cars are not used privately, this will need to be properly documented.
- Monitor legislative developments – Paul Q will provide a practical breakdown once the draft bill is released.
๐ Technical Summary for Legal Professionals:
- Legal Basis: Council Implementing Decision (EU) 2024/1280 allowing Slovakia to limit VAT deduction under Article 395 of Directive 2006/112/EC.
- Scope: 50% VAT deduction limit for passenger vehicles used partly for private purposes.
- Effective Date: July 1, 2025; the derogation is approved until June 30, 2028.
- Implementation Required: Amendment to the Slovak VAT Act No. 222/2004 Coll. (not yet adopted).
Impact: Significant reduction in the tax efficiency of company vehicles used for both business and private purposes.