Proposal for a COUNCIL IMPLEMENTING DECISION authorising the Slovak Republic to introduce a special measure derogating from point (a) of Article 26(1) and Articles 168 and 168a of Directive 2006/112/EC on the common system of value added tax
Date: 2025-03-13
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Slovakia, VAT, derogation from EU law, motor vehicle, tax relief, two-wheeled vehicle

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   EUROPEAN COMMISSION  Brussels, 13.3.2025  COM(2025) 104 final 2025/0054 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION authorising the Slovak Republic to introduce a special measure derogating from point (a) of Article 26(1) and Articles 168 and 168a of Directive 2006/112/EC on the common system of value added tax  
 
EXPLANATORY MEMORANDUM 

Pursuant to Article 395(1) of Directive 2006/112/EC of 28 November 2006 on the common 
system  of  value  added  tax1  ('the  VAT  Directive'),  the  Council,  acting  unanimously  on  a 
proposal  from  the Commission,  may authorise any Member State to  apply  special measures 
for  derogation  from  the  provisions  of  that  Directive  in  order  to  simplify  the  procedure  for 
collecting VAT or to prevent certain forms of tax evasion or avoidance. 

By  letter  registered  with  the  Commission  on  5  November  2024,  Slovakia  requested  an 
authorisation  to  derogate  from  Article  26(1),  point  (a),  Article  168  and  Article  168a  of  the 
VAT Directive in order to restrict the right to deduct the input VAT on  the purchase, lease, 
intracommunity acquisition and importation of motor vehicles M1 category, motorcycles L1e 
category and motorcycles L3e category2, as well as for the supply of relevant services, spare 
parts, accessories and fuel when they are used simultaneously for business purposes and other 
purposes.  With  the  request  Slovakia  provided  an  analysis  justifying  the  percentage  of 
deduction applicable, which is set at fifty per cent. 

In accordance with Article 395(2) of the VAT Directive, the Commission informed the other 
Member States by letter dated 29 November 2024 of the request made by Slovakia. By letter 
dated 2 December 2024, the Commission notified Slovakia that it had all the information it 
considered necessary for appraisal of the request. 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Article 168 of the VAT Directive provides that a taxable person is entitled to deduct the VAT 
charged on purchases made for the purpose of taxed transactions. Article 168a(1) of the VAT 
Directive provides that the VAT on expenditure related to immovable property forming part 
of  the  business  assets  of  a  taxable  person  and  used  both  for  business  and  non-business 
purposes shall be deductible only to the proportion of the property’s use for purposes of the 
taxable person’s business. Pursuant to Article 168a(2) of the VAT Directive Member States 
may also apply this rule in relation to expenditure related to other goods forming part of the 
business  assets  as  they  specify.  Article  26(1)(a)  of  the  same  Directive  requires  the  use  of 
goods forming part of the assets of a business for private purposes to be a supply of services 
for consideration if the VAT on the goods was eligible for deduction. This system allows for 
the recovery of initially deducted VAT in relation to the private use. 

In the case of passenger cars and motorcycles, this system is difficult to apply, because it is 
difficult to identify the split between private and business use. Where records are kept, they 
add  an  additional  burden  to  both  the  business  and  the  administration  in  maintaining  and 
checking them.  

Pursuant to Article 395 of the VAT Directive, Member States may apply measures derogating 
from the provisions of the VAT Directive to simplify the procedure for collecting VAT or to 
prevent certain forms of tax evasion or avoidance if they have been authorised by the Council. 

1 
2 

OJ L 347, 11.12.2006, p. 1, ELI: http://data.europa.eu/eli/dir/2006/112/oj. 
Regulation  (EU)  2018/858  of  the  European  Parliament  and  of  the  Council  of  30  May  2018  on  the 
approval and market surveillance of motor vehicles and their trailers, and of systems, components and 
separate technical units intended for such vehicles, amending Regulations (EC) No 715/2007 and (EC) 
No  595/2009  and  repealing  Directive  2007/46/EC  (OJ  L  151  14.6.2018,  p.  1)  and  Regulation  (EU) 
No 168/2013 of the European Parliament and of the Council of 15 January 2013 on the approval and 
market surveillance of two- or three-wheel vehicles and quadricycles (OJ L 060 2.3.2013, p. 52). 

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Slovakia  has  requested  to  be  allowed  to  restrict  the  right  of  deduction  for  certain  passenger 
cars and motorcycles which are not fully used for business purposes, and for the provision of 
certain  goods  and  services  related  to  them,  to  a  set  percentage  and  in  turn  to  relieve  the 
business  from  accounting  for  tax  on  the  private  use.  The  special  measure  would  relieve 
taxable  persons  from  having  to  treat  the  non-business  use  of  such  passenger  cars  and 
motorcycles  as  a  supply  of  services.  This  has  the  benefit  of  simplifying  the  system  for  all 
concerned  and  prevents,  at  the  same  time,  tax  evasion  or  avoidance  because  of  incorrect 
record keeping.  

The  advantages  of  the  use  of  a  flat  rate  were  confirmed  by  an  electronic  questionnaire 
elaborated  by  the  Slovakian  Ministry  of  Finance.  This  questionnaire  was  distributed  to 
businesses through business associations to obtain data on the use of vehicles that were part of 
the  business  assets  for  both  private  and  business  purposes.  From  the  examined  sample  of 
respondents,  71  %  of  them  preferred  the  use  of  a  flat-rate  percentage  for  the  deduction  of 
VAT  on  vehicles  of  mixed  use,  while  78  %  of  the  respondents  considered  the  current 
treatment as administrative burdensome. 

Together  with  the  data  obtained  from  the  survey,  Slovakia  has  analysed  data  derived  from 
control  activities  aimed  at  verifying  the  data  on  purchases  of  motor  vehicles  and  the 
entitlement of input tax deduction on those vehicles, as well as data from on-spot visits and 
audits.  From  the  different  activities  carried  out  the  Slovakian  authorities  arrived  at  the 
conclusion that a fifty per cent percentage is an accurate estimate of the distribution of the use 
of the vehicles between private and business use. 

Cars  and  motorcycles  covered  by  this  measure  are  motor  vehicles  from  the  M1  category, 
motorcycles from the L1e category and motorcycles from the L3e category not fully used for 
business purposes. The transactions covered are the purchase, intracommunity acquisition and 
importation  of  these  vehicles,  as  well  as  their  leasing.  The  limitation  of  the  right  of  deduct 
will  also  apply  to  the  abovementioned  transactions  when  related  to  spare  parts,  accessories, 
services and fuelling intended for these vehicles. Nevertheless, certain types of motor vehicles 
and motorcycles used for certain type of activities where the non-business use is considered 
negligible  are  excluded  from  the  scope  of  the  derogation.  This  exclusion  covers  cars  and 
motorcycles  purchased  for  resale,  hire  or  lease  or  used  for  transportation  of  passengers  for 
consideration, including taxi services, the provision of driving lessons, testing purposes or as 
replacement of vehicles undergoing works. 

Given the positive impact expected from the special measure on the administrative burden of 
taxpayers and tax authorities alike, it is proposed to authorise the derogating measure.  

The authorisation should be valid for a limited period, until 30 June 2028, in order to allow 
for  a  review  of  the  necessity  and  effectiveness  of  the  derogating  measure  and  the 
apportionment  rate  between  business  and  non-business  use  it  is  based  on.  Any  extension 
request should be accompanied by a report which includes a review of the percentage applied 
and should be sent to the Commission by 30 September 2027. 

• 

Consistency with existing policy provisions in the policy area 

Similar derogations in relation to the right of deduction have been granted to other Member 
States (Estonia3, Italy4, Latvia5, Hungary6, Poland7, Romania8 and Croatia9). 

3 

Council Implementing Decision (EU) 2021/1998 of 15 November 2021 authorising Estonia to apply a 
measure derogating from Article 26(1), point a, and Articles 168 and 168a of Directive 2006/112/EC on 
the common system of value added tax (OJ L 408, 17.11.2021, p. 3-5). 

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Article 176 of the VAT Directive stipulates that the Council shall determine the expenditure 
on which the VAT is not deductible. Until such time, it authorises Member States to maintain 
exclusions which were in place on 1 January 1979 or, in the case of the Member States which 
acceded to the Community after that date, on the date of their accession. There are therefore 
several  “stand  still”  provisions  restricting  the  right  to  deduct  VAT  in  relation  to  passenger 
cars.  

Notwithstanding previous initiatives to establish rules on which categories of expenditure may 
be  subject  to  a  restriction  on  the  right  to  deduct10,  such  derogation  is  appropriate  in  the 
awaiting of a harmonisation of these rules at EU level. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article 395 of the VAT Directive. 

• 

Subsidiarity (for non-exclusive competence)  

Considering  the  provision  of  the  VAT  Directive  on  which  the  proposal  is  based,  the 
subsidiarity principle does not apply. 

• 

Proportionality 

The Decision concerns an authorisation granted to a Member State upon its own request and 
does not constitute any obligation. 

Given  the  limited  scope  of  the  derogation,  the  special  measure  is  proportionate  to  the  aims 
pursued, i.e. to  simplify the procedure for collecting  the tax and to  prevent  certain  forms  of 
tax  evasion  or  avoidance.  In  particular,  given  the  potential  for  businesses  to  under  declare 
their  liability  and  the  burdensome  check  of  mileage  data  for  tax  authorities,  the  50  % 

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10 

Council Implementing Decision (EU) 2022/2411 of 6 December 2022 amending Decision 2007/441/EC 
authorising  the  Italian  Republic  to  apply  measures  derogating  from  Articles  26(1)(a)  and  168  of 
Directive 2006/112/EC on the common system of value added tax (OJ L 317, 9.12.2022, p. 120–121). 
Council  Implementing  Decision  (EU)  2021/1968  of  9  November  2021  amending  Implementing 
Decision 2015/2429/EU authorising Latvia to introduce a special measure derogating from point (a) of 
Article  26(1)  and  Articles  168  and  168a  of  Directive  2006/112/EC  on  the  common  system  of  value 
added tax (OJ L 401, 12.11.2021, p. 1-2). 
Council Implementing Decision (EU) 2021/1774 of 5 October 2021 amending Implementing Decision 
2018/1493  authorising  Hungary  to  introduce  a  special  measure  derogating  from  point  (a)  of  Article 
26(1) and Articles 168 and 168a of Directive 2006/112/EC  on the common system of value added tax 
(OJ L 360, 11.10.2021, p. 108–109). 
Council  Implementing  Decision  (EU)  2022/2385  of  6  December  2022  amending  Implementing 
Decision 2013/805/EU authorising the Republic of Poland to introduce measures derogating from point 
(a) of Article 26(1) and Article 168 of Directive 2006/112/EC on the common system of value added 
tax (OJ L 315, 7.12.2022, p. 87–88). 
Council Implementing Decision (EU) 2024/1641 of 24 May 2024 authorising Romania to apply special 
measures  derogating  from  Article  26(1),  point  (a),  and  Article  168  of  Directive  2006/112/EC  on  the 
common system of value added tax (OJ L, 2024/1641, 06.06.2024). 
Council  Implementing  Decision  (EU)  2024/2884  of  5  November  2024  amending  Implementing 
Decision (EU) 2018/1994 authorising Croatia to introduce a special measure derogating from point (a) 
of Article 26(1) and Articles 168 and 168a of Directive 2006/112/EC on the common system of value 
added tax (OJ L, 2024/2884, 13.11.2024). 
COM (2004) 728 final - Proposal for a Council Directive amending Directive 77/388/EEC with a view 
to simplifying value added tax obligations (OJ C 24, 29.1.2005, p.10) withdrawn on 21 May 2014 (OJ 
C 153 21. 05. 2014, p. 3) 

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restriction would simplify the VAT collection procedure and would prevent tax evasion inter 
alia through incorrect record keeping. 

• 

Choice of the instrument 

Proposed instrument: Council Implementing Decision. 

Under Article 395 of the VAT Directive, a derogation from the common VAT provisions is 
only  possible  upon  authorisation  of  the  Council acting  unanimously  on  a  proposal  from  the 
Commission. A Council Implementing Decision is the most suitable instrument since it can be 
addressed to an individual Member State. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

No stakeholder consultation has been conducted. The present proposal is based on a request 
made by Slovakia and concerns only this Member State. 

• 

Collection and use of expertise 

There was no need to recourse to external expertise. 

• 

Impact assessment 

The proposal is designed to simplify the procedure for charging tax by removing the need for 
taxable persons to keep records on the private use of specified passenger cars and, at the same 
time,  prevent  VAT  evasion  through  incorrect  record  keeping.  It  has,  therefore,  a  potential 
positive impact for both businesses and the tax administration.  

The Slovakian tax authorities conducted an analysis on the data derived from control activities 
from  January 2023 to  May 2024. From this analysis it concluded that taxpayers applied the 
flat rate foreseen in the Slovakian Act on Income Tax to the VAT paid on the acquisition of 
passenger cars and motorcycles and related expenses, instead of determining the real use for 
private and business purposes of the vehicles. Even though the provision was aimed at its use 
only in relation to income tax, taxpayers considered that the application of this flat rate could 
avoid litigation with tax authorities.  

Further, the tax authorities conducted audits on 255 taxpayers from 2019 to 2024. The audits 
were merely focused on the usage of motor vehicles and the verification was carried out on 
277 motor vehicles from which 240 were passenger motor vehicles. According to the Slovak 
authorities,  these  audits  proved  that  in  many  cases  taxpayers  were  practising  incorrect 
deductions on the input VAT related to those vehicles. The Slovak authorities also arrived at 
the conclusion that the use for business purposes was slightly over fifty per cent of the total 
use.  

Finally,  the  Slovak  authorities  obtained  additional  data  from  a  questionnaire  that  was 
distributed to businesses through business associations. 

From the analysis of the data obtained, the Slovak authorities arrived at the conclusion that a 
fifty per cent flat rate constitutes a realistic proxy of the distribution of the use of the car for 
private and business purposes. 

• 

Fundamental rights 

The proposal does not have any consequences for the protection of fundamental rights. 

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4. 

BUDGETARY IMPLICATIONS 

The proposal will have a negligible effect on the overall amount of tax revenue collected at 
the stage of final consumption and will have no adverse impact on the Union’s own resources 
accruing from VAT. 

5. 

OTHER ELEMENTS 

The proposal is limited in time and includes a sunset clause set at 30 June 2028. 

In  case  Slovakia  would  consider  an  extension  of  the  special  measure,  a  report  including  a 
review  of  the  percentage  limit  should  be  submitted  to  the  Commission  together  with  the 
extension request, no later than 30 September 2027. 

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2025/0054 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising the Slovak Republic to introduce a special measure derogating from point 
(a) of Article 26(1) and Articles 168 and 168a of Directive 2006/112/EC on the common 
system of value added tax 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union,  

Having  regard  to  Council  Directive  2006/112/EC  of  28  November  2006  on  the  common 
system of value added tax1, and in particular Article 395(1), first subparagraph, thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

Articles  168  and  168a  of  Directive  2006/112/EC  govern  taxable  persons’  right  to 
deduct value added tax (VAT) charged on supplies of goods and services used by them 
for the purposes of their taxed transactions. Article 26(1), point (a), of that Directive 
contains a requirement to account for VAT when a business asset is  used for private 
purposes of taxable persons or their staff or, more generally, for purposes other than 
those of their business. 

By  letter  registered  with  the  Commission  on  5  November  2024,  Slovakia  requested 
authorisation  in  accordance  with  Aricle  395(2),  first  subparagraph,  of  Directive 
2006/112/EC to introduce a special measure derogating from point (a) of Article 26(1) 
and Articles 168 and 168a of that Directive to limit to 50 % the right to deduct VAT 
on expenditure on certain vehicles not wholly used for business purposes, and to not 
treat  as  supplies  of  services  for  consideration  the  use  for  private  purposes  of  those 
vehicles included in the assets of a taxable person’s business, where that vehicle has 
been subject to such limitation (the ‘special measure’). 

The  requested  special  measure  covers  motor  vehicles,  not  fully  used  for  business 
purposes, from the M1 category, motorcycles from the L1e category and motorcycles 
from  the  L3e  category,  as  specified  in  Regulation  (EU)  2018/858  of  the  European 
Parliament  and  of  the  Council  of  30  May  2018  on  the  approval  and  market 
surveillance  of  motor  vehicles  and  their  trailers,  and  of  systems,  components  and 
separate technical units intended for such vehicles2 and Regulation (EU) No 168/2013 
of the European Parliament and of the Council of 15 January 2013 on the approval and 

1 
2 

OJ L 347, 11.12.2006, p. 1, ELI: http://data.europa.eu/eli/dir/2006/112/oj. 
Regulation  (EU)  2018/858  of  the  European  Parliament  and  of  the  Council  of  30  May  2018  on  the 
approval and market surveillance of motor vehicles and their trailers, and of systems, components and 
separate technical units intended for such vehicles, amending Regulations (EC) No 715/2007 and (EC) 
No 595/2009 and repealing Directive 2007/46/EC (OJ L 151 14.6.2018, p. 1). 

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market  surveillance  of  two-  or  three-wheel  vehicles  and  quadricycles3.  The 
transactions covered are the purchase, intracommunity acquisition and importation of 
these  vehicles,  as  well  as  their  leasing.  The  limitation  of  the  right  to  deduct  VAT 
includes  expenditure  on  spare  parts,  accessories,  services  and  fuelling  intended  for 
these vehicles. 

Certain  motor  vehicles  should  be  excluded  from  the  scope  of  the  special  measure 
since,  due  to  the  type  of  business  they  are  used  for,  any  non-business  use  thereof  is 
considered  to  be  negligible.  Therefore,  the  special  measure  should  not  apply  to  cars 
and  motorcycles  purchased  for  resale,  hire  or  lease  or  used  for  transportation  of 
passengers for consideration, including taxi services, the provision of driving lessons, 
testing purposes or as replacement of vehicles undergoing works. 

In  accordance  with  Article  395(2),  second  subparagraph,  of  Directive  2006/112/EC, 
the Commission transmitted the request to the other Member States by letter dated 29 
November 2024. By letter dated 2 December 2024, the Commission notified Slovakia 
that it had all the information necessary for the appraisal of the request. 

Slovakia  included  in  the  request  an  explanation  of  the  reasons  for  setting  the 
percentage for the limitation of the right to deduct VAT to 50. Slovakia used for that 
purpose  data  obtained  from  control  activities  and  audits,  together  with  a  survey 
conducted with businesses. According to Slovakia, the result from the analysis of this 
data led to set the percentage of 50 as an accurate proxy of the distribution, between 
private and business purposes, of the use of the vehicles to which the special measure 
is intended.  

Slovakia  submits  that  the  special  measure  will  have  a  positive  impact  on  the 
administrative  burden  for  the  taxpayers  and  tax  authorities  by  simplifying  VAT 
collection  and  preventing  tax  evasion  through  incorrect  record  keeping.  For  these 
reasons, the Commission considers it to be appropriate to authorise Slovakia to apply 
the special measure until 30 June 2028.  

The special measure should be limited to the time needed to evaluate its effectiveness 
and the appropriateness of the percentage rate applied. 

The special measure is proportionate to the objectives pursued, namely, to simplify the 
procedure  for  collecting  VAT  and  to  prevent  certain  forms  of  tax  evasion  or 
avoidance, since it is limited in time and scope. In addition, the special measure does 
not give rise to a risk that fraud would shift to other sectors or to other Member States. 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

(10) 

If Slovakia considers an extension of the special measure beyond 30 June 2028 to be 
necessary, it should submit a request for such an extension to the Commission by 30 
September 2027. That request should be accompanied by a report on the application of 
the special measure, including a review of the percentage applied. 

(11)  According  to  information  provided  by  Slovakia,  the  special  measure  will  have  only 
negligible effect on the overall amount of tax revenue Slovakia collects at the stage of 
final consumption, and it will have no adverse impact on the Union’s own resources 
accruing from VAT, 

3 

Regulation (EU) No 168/2013 of the European Parliament and of the Council of 15 January 2013 on the 
approval and market surveillance of two- or three-wheel vehicles and quadricycles (OJ L 060 2.3.2013, 
p. 52). 

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HAS ADOPTED THIS DECISION:  

Article 1 

By  way  of  derogation  from  Articles  168  and  168a  of  Directive  2006/112/EC,  the  Slovak 
Republic  is  authorised  to  limit  to  50 %  the  right  to  deduct  value  added  tax  (VAT)  on 
expenditure on the following categories of vehicles, not wholly used for business purposes: 

(a) 

(b) 

(c) 

motor  vehicles  from  the  M1  category,  specified  in  Article  4(1)(a)(i)  of  Regulation 
(EU) 2018/858; 

motorcycles from  the L1e  category, specified in  Article 4(2)(a) of Regulation  (EU) 
168/2013; 

motorcycles from  the L3e category, specified in  Article 4(2)(c) of Regulation  (EU) 
No 168/2013.  

The first paragraph shall not apply to vehicles used or purchased for the following: 

(a) 

(b) 

(c) 

(d) 

(e) 

resale, hire or lease; 

transportation of passengers for consideration, including taxi services; 

the provision of driving lessons; 

testing purposes; 

as replacement of vehicles undergoing works. 

Article 2 

By  way  of  derogation  from  Article  26(1),  point  (a)  of  Directive  2006/112/EC,  the  Slovak 
Republic shall not treat the use for non-business purposes of a vehicle referred to in Article 1, 
first paragraph, included in the assets of a taxable person’s business,  as supplies of services 
for consideration, where that vehicle has been subject to a limit authorised under Article 1 of 
this Decision. 

The expenditure referred to in Article 1 shall cover all of the following: 

Article 3 

(1) 

(2) 

1. 

2. 

purchase, leasing, intra-Community acquisition and importation of vehicles referred 
to in Article 1, first paragraph; 

expenditure on supplies of goods or services performed in relation to those vehicles 
and their use, including the purchase of fuel. 

Article 4 

This Decision shall take effect on the day of its notification. 

This Decision shall apply from 1 July 2025. It shall expire on 30 June 2028. 

Any request for the extension of the authorisation provided for in this Decision shall 
be submitted to the Commission by 30 September 2027 and accompanied by a report 
which includes a review of the percentage set out in Article 1. 

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This Decision is addressed to the Slovak Republic. 

Done at Brussels, 

Article 5 

For the Council 
The President 

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