Continuing our series on the impact of depreciation limits on cars in the context of the upcoming amendment, we are further going to address car leasing.
Let's take a closer look at the main changes from the perspective of both lessees and lessors.
Financial Lease
Just as with depreciation of a newly acquired car, a similar limitation applies to car-leasing expenses.
Lessees’ Perspective
Lessees can deduct a maximum of 2 million CZK for the entire duration of the corresponding financial lease. Similarly to depreciation, only a proportional part of the lease installments is tax-deductible.
The limit of 2 million CZK also includes the depreciation of a purchased vehicle. If the limit is not exhausted by the lease payments, the remaining amount can be used during the depreciation of the purchased vehicle.
Lessors’ Perspective
In this regard, car-leasing companies are in a more favorable position, since lessors will not be limited by the upcoming amendment, regardless of the kind of lessee their cars are leased to. This means lessors have the right to depreciate the cars up to the full entry price.
Operating Lease
Since financial and operating leases work differently, there also are different rules for tax-deductible expenses. When it comes to operating lease, the subject of the corresponding contract is not purchased by the lessee when the contract expires.
Lessees’ Perspective
Lessees of an operating lease can deduct all installments without a limit. Since they cannot buy the leased vehicle, there is no need to address depreciation limits. Provided that given legal conditions are met, there are also no limits on VAT deductions.
Lessors’ Perspective
Unlike financial lease, leasing companies cannot claim an exception for tax depreciation in this case. The situation is thus similar to acquiring a car by any other entrepreneur. Lessors are limited by the maximum deductible depreciation if the purchase price of the vehicle in question exceeds 2 million CZK. VAT deduction will be limited analogously.
Download PDF: Tax-deductible expenses limits on leased cars
