The End of “Lex Ferrari”: What Will Change for VAT Deductions on High-Value Cars in 2027?
As of 1 January 2027, an important legislative change will come into effect. Act No. 180/2026 Coll. abolishes the existing CZK 420,000 cap on VAT deductions for certain passenger cars. This will allow businesses and entrepreneurs to claim a full VAT deduction on higher-value vehicles, provided all statutory conditions are met.
The change will affect anyone planning to purchase a higher-end company car or invest in their corporate fleet at the turn of 2026 and 2027.
Key Changes from 2027
- End of the VAT deduction cap: The CZK 420,000 limit (equivalent to 21% VAT on a purchase price of CZK 2 million excluding VAT) will be abolished. Standard rules will once again apply to category M1 vehicles.
- What remains unchanged: VAT deductions will continue to depend on the company's economic activity. Input VAT can only be deducted in proportion to the vehicle's business use.
- Difference compared with corporate income tax: Do not confuse VAT deductions with tax depreciation. While the VAT deduction cap will be abolished from 2027, the CZK 2 million limit for tax depreciation will remain in place.
Practical Example: How Much Could You Save?
When purchasing a company car worth CZK 3,000,000 excluding VAT (with VAT at 21%, amounting to CZK 630,000):
- Until the end of 2026, the VAT deduction was capped at CZK 420,000.
- From 2027, if the vehicle is used exclusively for business purposes, you can claim a full VAT deduction of CZK 630,000.
- The difference in VAT savings could be as much as CZK 210,000 — a substantial amount worth considering.
What to Consider at the Turn of 2026 and 2027
Timing will be crucial. The right to deduct VAT depends on the date on which the entitlement arises and when the vehicle is brought into use.
Vehicles delivered and used in 2026 will still be subject to the existing CZK 420,000 cap. Vehicles delivered from January 2027 onwards will be subject to the new rules without an upper limit.
Did you purchase a vehicle in 2026, but it will not be brought into use until January 2027? The law addresses this situation in the transitional provisions of Section 33 of Act No. 180/2026 Coll. Under certain conditions, it may be possible to increase the previously limited VAT deduction by filing a supplementary tax return and claim the full deduction, no later than 31 January 2027.
Special attention should also be paid to technical improvements to vehicles, ongoing leasing arrangements and purchases that are still in progress.
How Can TaxVision Help?
Are you planning to purchase a higher-value vehicle and want to make the most of the new legislative opportunities? Have you paid deposits on a vehicle that has already been ordered and are unsure how to claim the VAT deduction? We can guide you through the entire process.
- Comprehensive assessment: We will review contracts, deposits and planned vehicle delivery dates around the turn of the year.
- Tax optimisation: We will help you correctly determine the proportion of business and private use and assess the tax depreciation implications.
- Peace of mind: We will handle communication with the tax authorities and monitor all statutory deadlines, including those for supplementary tax returns.
Czech sources:
Section 72 of Act No. 235/2004 Coll., on Value Added Tax
Section 33 of Act No. 180/2026 Coll., on the Registration of Sales and Amendments to Certain Related Acts
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