The Ministry of Finance of the Slovak Republic plans to restrict the VAT deduction for passenger vehicles and motorcycles that are not used exclusively for business purposes. In connection with this, Slovakia has requested a waiver from the European Commission to limit the VAT deduction to 50%. According to the Commission's draft decision from March 2025, it is expected that the waiver will be granted to Slovakia.
For vehicles that are even partially used for private purposes, the VAT deduction will no longer be possible at 100% or according to the actual use for business purposes, but only at a flat rate of 50%. This restriction should apply to passenger motor vehicles in category M1 and motorcycles in categories L1e and L3e.
The flat rate deduction of 50% should be applied regardless of the actual extent of use for business purposes and regardless of whether the VAT payer keeps a logbook, has GPS, or applies the 80:20 lump-sum expenses for income tax purposes.
The VAT deduction should be limited to half for the purchase, import, or leasing of the vehicle. The restriction will also apply to any costs related to the use of the vehicle, such as repairs, fuel purchases, or vehicle equipment.
Full VAT deduction will continue to be possible only for vehicles that are verifiably used exclusively for business purposes, or vehicles used for specific purposes where private use is excluded or negligible, namely vehicles intended for:
- a) resale, hire or leasing (from the perspective of the seller or the leasing company);
- b) the transportation of passengers for consideration, including taxi services;
- c) the provision of driving lessons;
- d) testing purposes;
- e) as replacement of vehicles undergoing work.
Slovakia will be able to apply the restriction from July 1, 2025, to June 30, 2028, with the possibility of extending this period.
The new rules still need to be implemented into Slovak legislation. Therefore, we expect the publication of the draft amendment to the VAT Act soon, which should also clarify some issues such as the method of proving the use of the vehicle exclusively for business purposes, applying the restriction on deduction during the transition period, changing the purpose of use, and so on.
What does this mean?
The restriction of the VAT deduction to half will mean an increase in costs related to the acquisition and operation of motor vehicles for most VAT payers. However, VAT payers will have greater legal certainty when claiming VAT deductions for vehicles also used for private purposes, and the new rules are anticipated to ease administrative burdens.
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