Application of VAT on selected passenger cars from 1.1.2024

The General Financial Directorate has issued information on the application of VAT on selected passenger cars.

The information presents changes in the input tax deduction for the purchase of a selected passenger car in the Czech Republic as well as its acquisition from another Member State or import from a third country. A selected passenger car is a motor vehicle with a maximum of eight seats in addition to the driver's seat and no standing room for passengers. 

Limit amount of tax deduction for the acquisition of a specified passenger car

In the case of the acquisition of a selected passenger car as a fixed asset of the taxpayer, a maximum input tax deduction of CZK 420 000 may be claimed if the taxable amount is CZK 2 000 000 or more. The limitation of the amount of input tax shall be applied to cars acquired from 1 January 2024 and to technical improvement carried out after 1 January 2024.

This means that if a taxpayer acquires a selected passenger car worth CZK 3,000,000 + VAT in the amount of CZK 630,000 as a fixed asset and uses this car entirely for purposes that give rise to a full entitlement to deduction, an input tax deduction of only CZK 420,000 can be applied. Setting a limit on the amount of input tax on the acquisition of a selected passenger car does not affect the amount of output tax on its sale. 

Technical appreciation

The input tax deduction limit of CZK 420 000 also applies to technical improvements to a selected passenger car. This means that the sum of the input tax on the acquisition of a selected passenger car and the input tax on its technical improvements must not exceed the limit amount of CZK 420,000. The limitation does not apply to selected passenger cars not classified as fixed assets.

Leasing

The input tax limit applies to lessees (users) of finance leases. Leasing companies are not subject to this limit. Conversely, in the case of operating leases, the limit on the amount of input tax applies to lessors, as they are the ones who register the assets as fixed assets. The supply of a selected passenger car to a lessee is a supply of a service where the amount of input tax on the lessee is no longer limited.

The full text of the information of the General Financial Directorate can be found here.

If you have any further questions or doubts about the VAT deduction on the purchase of a car, please do not hesitate to contact us.