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VAT on company cars: 5 rules on what your company can deduct
Step Inside Accounting · Practical guide
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1. Petrol, diesel and standard hybrids: no VAT on the purchase
For passenger cars running on petrol, diesel or non-plug-in hybrids, the company cannot deduct the VAT (IVA) on the purchase, leasing, rental, maintenance, repairs or tolls.
The only exception is companies whose business is selling or renting cars. For everyone else, the VAT on these cars is a cost.
2. Electric cars: full VAT, up to €62,500
On a 100% electric car, the company deducts all the VAT on the purchase or leasing, as long as the price before VAT, including extras, does not exceed €62,500. The limit is all or nothing: above it, no VAT at all can be deducted.
The VAT on the electricity used to charge the car is also deductible. Maintenance and repairs still give no deduction.
Example
An electric car for €45,000 + €10,350 of VAT: the company recovers the €10,350. If the same car, with extras, cost €63,000 before VAT, the company would recover nothing.
3. Plug-in hybrids and LPG or natural gas cars
- Plug-in hybrids: the VAT on the purchase or leasing is fully deductible if the price before VAT does not exceed €50,000. The charging electricity is also deductible; the fuel follows the fuel rule (see rule 5).
- LPG or natural gas: 50% of the VAT on the purchase or leasing is deductible if the price before VAT does not exceed €37,500 and the vehicle registration document shows that fuel.
As with electric cars, the limits are all or nothing, and maintenance and repairs give no deduction.
4. Commercial vans: VAT deductible
For vehicles with 2 or 3 seats, including the driver, used to carry goods or for the company’s work, the VAT on the purchase, leasing, maintenance, repairs and tolls is deductible.
What counts is the number of seats and the use, not what the registration document says: a vehicle classed as “goods” but with more than 3 seats gives no deduction. Double-cab pick-ups are also excluded.
5. Fuel, electricity and personal use
For fuel, the rule is the same for all light vehicles, vans included:
- Petrol: 0% of the VAT deductible.
- Diesel, LPG and natural gas: 50%.
- Electricity for electric cars and plug-in hybrids: deductible.
If the car is also used privately, the deductible VAT has to be adjusted to the share of business use. And every invoice, from the purchase to the fuel, must be in the company’s name.
Example
The company spends €150 a month on diesel, with €28.05 of VAT. It deducts half, €14.03. With petrol, it would deduct nothing.
Team tip
Before buying or leasing a car through the company, send us the quote. The price before VAT, the extras and the type of engine decide whether the company recovers all the VAT or none, and for corporate tax (IRC) the car also carries autonomous taxation, with its own rules.
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This article is for information only and does not replace professional advice. Figures and rules are those in force at the date of publication and may change.
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