VAT deduction on a company car in Czechia 2026 — rules and limits

A company car is one of the biggest routine purchases a business in Czechia deals with — and when the company is a VAT payer, it naturally wants to deduct the VAT on the purchase price. Until recently this was straightforward: you bought the car for the company and claimed the whole VAT. Since the so-called consolidation package, in force from 2024, it is no longer that simple — and the same rules apply in 2026.

The change does not affect every car or every amount, which is exactly why many people overlook it. It hits VAT payers who buy a category M1 passenger car and record it as a fixed asset of the company. If you are planning to buy a more expensive car, it pays to know in advance how much VAT you will actually get back.

When the company is entitled to a deduction at all

The basic rule is unchanged: a VAT payer is entitled to deduct VAT on a car purchase if the vehicle is used for its economic activity. For a car used solely for business it is a full entitlement; for ordinary running costs (fuel, servicing) VAT is deducted in the same way, according to use. Anyone still weighing up whether and when to register will find the context in our article on when to register for VAT in Czechia and what the rates are.

The entitlement therefore arises from business use — and only then do the two limits described below apply to it: a cap in korunas and a reduction for private trips.

The CZK 420,000 cap — the main limit

The most important change is a clear cap. For a „selected passenger car" of category M1 that is a fixed asset, a payer can deduct at most CZK 420,000 of VAT. That figure is not random — it equals 21% VAT on a purchase price of CZK 2 million excluding VAT. In other words, up to a car price of two million you will not feel any restriction; the cap only bites on more expensive vehicles.

Example: a car costing CZK 2.5 million excluding VAT carries VAT of CZK 525,000. Yet only CZK 420,000 can be deducted — the remaining CZK 105,000 becomes part of the vehicle's entry price, not reclaimable tax. The more expensive the car, the larger the share of VAT that stays „in the car" and is not returned to the company.

The limit applies regardless of whether you buy the car in Czechia, in another EU state or import it from a third country, and it covers a single vehicle including any later technical improvement. Vehicles such as ambulances and hearses, or cars operated under a road-transport licence, remain outside the restriction.

Private trips reduce the deduction

The second limit is how the car is used. If the vehicle also serves private purposes of the director or an employee, the payer cannot claim the full VAT but only a proportional entitlement matching the actual share of business use. This reduction is assessed before the koruna cap and applies to cheaper cars under two million as well.

In practice it comes down to one thing: proof. To defend a high or full deduction you need honest trip records showing what share of the kilometres is for the business. Without them, the tax authority can easily challenge the ratio.

The link to tax depreciation

The same two-million threshold feeds into income tax as well. The tax-deductible entry price of a passenger car is capped at CZK 2 million, so you cannot depreciate more from a pricier car than from one costing two million. VAT and depreciation thus go hand in hand, and with a more expensive vehicle you have to reckon with both. How depreciation and costs enter a company's tax base is something we cover in our piece on corporate income tax for an s.r.o..

What to take away

For an ordinary company car up to two million korunas, practically nothing changes — you deduct VAT as before, just according to the degree of business use. The CZK 420,000 cap is felt only on premium vehicles, and it is worth factoring in already when deciding whether to buy a given model through the company. If you just want an overview of how VAT works in Czechia for a smaller business, see our basic guide to VAT for small companies.

And with all the paperwork, order in your documents and a reliable registered address make life easier just as a well-kept logbook does — even in a carefully curated house for just thirty companies.

Conclusion

Deducting VAT on a company car is still possible in 2026, but with two limits. The first is a proportional reduction according to private use; the second is a cap of CZK 420,000 for category M1 vehicles held as fixed assets — equal to the VAT on a price of two million korunas. Up to that price a company feels nothing; above it, part of the tax remains irrecoverably in the car's entry price. The same threshold applies to tax depreciation, so with a more expensive car you must reckon with both restrictions at once.

Frequently asked questions

How much VAT can I deduct on a company car in 2026?

If the car is a selected category M1 passenger vehicle held as a fixed asset, at most CZK 420,000 — equal to 21% VAT on a price of two million korunas excluding VAT. For cheaper cars there is no cap and you deduct the full VAT according to the degree of business use. Above two million, part of the VAT stays irrecoverably in the vehicle's entry price. The limit applies no matter where you buy the car.

Does a flat 50% VAT deduction apply to company cars in Czechia?

No. The flat 50% reduction of the deduction is a Slovak rule effective from 2026 and does not apply to Czech companies. In Czechia, VAT on a mixed-use car is reduced proportionally according to the actual share of business trips, not by a fixed percentage. On top of that, the CZK 420,000 cap applies to more expensive vehicles. Trip records that prove the ratio are therefore decisive.

Does the CZK 420,000 cap also apply to tax depreciation?

The CZK 420,000 cap concerns VAT directly. For income tax a comparable threshold applies — the tax-deductible entry price of a passenger car is capped at two million korunas. Both limits stem from the same threshold and hit the same vehicle, so with a pricier car they take effect at the same time. From a car over two million you will claim neither the full VAT nor full depreciation.