A work car: what you can deduct on VAT and IRS

Henrique is an engineer on green receipts and he’s about to buy a car for work. He already pictures himself deducting everything - the purchase, the fuel, the servicing. Except “deducting the car” is really two separate calculations - and the answers depend on the car you buy and the regime you’re in.

It sounds simple. But it’s easy to count on a discount the law doesn’t give. This is the overview; each piece then has its own guide (see the series at the end).

First: it’s two calculations, not one

VAT - the tax you already paid on the purchase and the running costs. The question is: can you recover it?
IRS - the tax on your profit. The question is: does the car lower your taxable income?

They’re independent. A car can give you deductible VAT and still not move your IRS - or the other way around. And one thing up front: being on the normal VAT regime and having a NIF does not mean every expense is 100% deductible. There has to be a link between the purchase and the activity that gives a deduction right (art. 20 of the CIVA), and you need the invoice in your name with VAT itemised - a bank debit or an e-Fatura entry is not enough (art. 19(2)).

The VAT on the purchase depends on the type of car

On a passenger car (viatura de turismo) the general rule is that VAT is not deductible (art. 21 of the CIVA). The exceptions are for the greener cars:

Deductible VAT on the purchase (passenger car)

100% electric (BEV)

You recover 100% of the VAT, up to a price of €62,500 (ex-VAT).

Plug-in hybrid (PHEV)

100% of the VAT, up to €50,000 (ex-VAT).

LPG or CNG

50% of the VAT, up to €37,500 (ex-VAT).

Ordinary hybrid (no plug)

0% - it doesn't get the electric benefit.

Diesel or petrol

0% - the general rule of art. 21, no deduction.

Use doesn’t decide it: driving a passenger car only for work doesn’t turn it into a “commercial” - the classification comes from how the vehicle is built, not from your intention.

The limit is a door, not a ceiling

This is the costliest detail. If the car costs one cent above the figure, you lose the whole deduction - not just the part above. And the limit counts the costs tied to the purchase (legal fees, for example), even if invoiced separately: you can’t split the price across two invoices to “fit”.

The limit in practice (BEV, invoice at 23%)

€38,000 ex-VAT

VAT €8,740 - within the limit, you recover the €8,740.

€62,500 ex-VAT

The limit is included: you recover the VAT (€14,375).

€62,500.01 ex-VAT

One cent above: you lose the whole deduction for that item.

€61,000 + €2,000 of extras invoiced separately

The €63,000 count together - above the limit, not two limits.

The price base is the value after real discounts plus the costs tied to it up to the point you start using the car. And watch the trade-in: it isn’t always a discount - it can be the sale of your old car, a separate transaction. Check what the invoice actually says.

And used cars?

Normal sale with VAT itemised: the rules above apply.
Bought from a private individual, no VAT: there’s no input VAT to deduct.
Margin scheme (typical of used-car dealers): you can’t “extract” a hidden VAT from the price with a total × 23/123 sum. There’s a deduction only if the invoice shows VAT itemised - look for the scheme’s mention on the document.

Henrique buys a €38,000 electric car

Car price (ex-VAT) €38,000

VAT on the purchase (23%) €8,740

Within the €62,500 limit? Yes

VAT you recover €8,740

TVDE, taxi, goods: when the car is the business

If the car is your activity, the rules change (art. 21 of the CIVA): TVDE can deduct the car and repairs (but diesel generally stays at 50%); a licensed taxi has a wider deduction, extended to fuel; rent-a-car has its own basis; for goods transport, fuel is only 100% above 3,500 kg. Driving to your clients does not make you a carrier. For the VAT on your activity’s other expenses, see the guide to deducting VAT on professional expenses.

This series: the car, piece by piece

This guide is the map. Each topic has its own article, with the sums and the cases:

Credit, leasing and renting - how the VAT changes depending on how you finance the car.
Fuel and charging - running costs and the VAT of charging at home, on a wallbox and in public.
Personal and business use - the mixed-use car, the pro rata and the “mileage compensation”.
The car on IRS - simplified regime, organised accounting and autonomous taxation.
Selling, declaring and keeping - the VAT return, selling the car and the document file.

Where FIZ comes in

FIZ records the purchase and the car’s running costs and applies the VAT percentage the law allows for each type, so you don’t recover too much or too little - and the VAT and Social Security returns come out calculated and filed for you.

In summary

It’s two calculations. VAT (recovering the tax on the purchase and running costs) and IRS (lowering your profit) follow their own, independent rules.
VAT on the purchase: 100% on an electric car (up to €62,500) or PHEV (up to €50,000), 50% on LPG/CNG, 0% on diesel/petrol. The limit is all or nothing, and it counts the price with the tied-in costs.
Used cars: you only deduct if the invoice shows VAT itemised; under the margin scheme there’s no VAT to extract.