Car on credit, leasing or renting: and the VAT?

Sofia is going to get the same electric car she saw in the purchase guide, but she’s hesitating: pay outright, take credit, lease or rent? The question isn’t only financial - each route has a different VAT calculation, and in one of them you can end up with no deduction at all.

The golden rule: VAT looks at the car, not at how you pay

The right to the VAT on the purchase and the price limit (€62,500 on a BEV, €50,000 on a PHEV, €37,500 on LPG/CNG) attach to the value of the car, not to how you finance it. Paying outright or on credit doesn’t change the benefit: it’s still buying an asset.

And there’s a common mistake to avoid: the credit instalments are not a second purchase. Repaying the principal to the bank doesn’t generate new VAT to deduct - the VAT was on the car invoice, once.

How you financed it - and what that changes

Outright (own funds)

Buying an asset. Where the money comes from doesn't change the car's benefit.

Bank credit

Separate the car sale from the credit contract. Repaying principal is not a new purchase or new VAT.

Financial lease (leasing)

The limit looks at the car's value at the lessor; the VAT of each rental is analysed.

Renting (operational lease)

A service, not a purchase. You only deduct if the components are itemised (see below).

Advance / deposit

The deposit is invoiced, then the final one with the offset. The limit counts the total, not just the deposit.

Buyout at end of lease

A purchase option, its own invoice. Handle it separately, with your accountant.

Renting: the case where it’s easy to lose everything

With renting you pay a rental that often bundles hire + maintenance + insurance + other services into one figure. And here’s the trap: the AT distinguishes those components. If they come as a single price, with no breakdown, the AT does not allow deducting the VAT of the whole operation (PIV 26763). To recover anything, the invoice has to separate the car hire from the services.

Renting: single price vs itemised

Monthly rental as one figure (all bundled) no breakdown

VAT the AT allows you to deduct 0 of the operation

Same rental, hire and services split itemised

VAT analysed component by component deduction possible

Leasing: the limit is the car’s value

In a financial lease, the price limit applies to the car’s value at source (at the lessor), not to the sum of the rentals. Then the VAT of each rental is analysed under the contract. It isn’t “add up the rentals and compare with €62,500” - it’s the car’s value that opens or closes the door.

Advance, interest and the right moment

Deposit: if you pay an advance and then the final invoice, the limit counts the total of the car, not just the deposit - and don’t count the same VAT twice.
Loan interest: as a rule it’s a financial service, not the car’s VAT. And note: not every bank fee is exempt - it depends on the service and the invoice line (art. 9(27) of the CIVA).
The moment to deduct arises from the right and the invoice received, not from the date the bank debited you (art. 22(1)-(3) of the CIVA). A dealer’s quote is not yet input VAT.

Where FIZ comes in

FIZ records the car invoice and the rentals, and applies the right VAT percentage to each - without mistaking the credit principal for a new purchase. The VAT return comes out calculated from the documents you have.

In summary

How you pay doesn’t change the car’s benefit: the right and the limit look at the car’s value. Credit instalments are not a new purchase.
Renting: at a single price with no breakdown, the AT won’t let you deduct the operation’s VAT. It requires an invoice with the components split.
Leasing: the limit is the car’s value at source; the moment to deduct comes from the invoice, not the bank debit.

Next piece: the running costs and charging.