Provision of company car to employee
A common employee benefit is the possibility to use a company car for private purposes. How to provide this benefit correctly? What is the effect of the vehicle’s emission parameters? How to proceed when a vehicle is provided exclusively for private use or was acquired by the employer under finance lease arrangements? How much additional income tax to pay when the employee contributes to the vehicle provided to them, and how to tax privately consumed fuel paid by the employer? Answers to all these questions can be found in our article.
Provision of a vehicle for both business and private purposes
If an employee is provided a road motor vehicle (meaning also e.g., a motorbike) free of charge for both business and private use, their related taxable income is determined based on a specified percentage of the vehicle's entry??input price. This also means that no account is taken of the wear and tear or age of the vehicle. For the purposes of determining additional tax (on the employee’s non-financial income), the entry price must include VAT, if any.
For a long time, the percentage to determine additional taxable income has been set uniformly at 1% of the entry price of the vehicle per month. From 1 July 2022, the law added the option to determine the taxable income at only 0.5% of the entry price when low emission vehicles are provided. 2024 then brought another change: for zero emission vehicles, the taxable income shall be 0.25% of the entry price of the vehicle.
The limit of CZK 2 million for the tax depreciation of vehicles, introduced in January 2024, is irrelevant for determining the additional tax; the amount of the non-financial income should always be calculated on the full entry price of the vehicle.
The minimum amount of the employee’s taxable income shall always be at least CZK 1,000 for each commenced month of providing the vehicle. In accordance with GFD Instruction D-59, it is not decisive for the origination of taxable income whether the employee actually used the vehicle for private purposes but that they had the possibility to do so.
If more than one vehicle is provided to an employee within one month consecutively, the taxable income shall be determined based on the vehicle with the highest entry price. However, if the employee can use more than one vehicle in a given month simultaneously, the taxable income for each vehicle provided must be included in the tax base.
Where employer and employee agree that the employee should pay a certain amount for the provision of a vehicle, the taxable income shall be determined as the difference between the employee's payment and the income determined based on the percentage of the vehicle’s entry price.
Low and zero emission vehicles
A low emission vehicle is defined by the Act on the Promotion of Low Emission Vehicles through Public Procurement and Public Services in Passenger Transport (No. 360/2022 Coll.). Until 31 December 2025, these vehicles (in categories M1, M2 and N1) are defined as vehicles not exceeding a CO2 emission limit of 50 g/km and 80% of the emission limits for air pollutants in real operation. Compliance with the limits can be assessed based on the vehicle’s Certificate of Conformity. Information on CO2 emissions can be found in the vehicle's large technical certificate, under Emissions, item V.7 CO2 [g/km] (after the abolition of large technical certificates, some data are only recorded electronically). From 2026 until the end of 2030, only de facto zero emission vehicles will be regarded as low emission vehicles in these categories.
Zero emission vehicles are those with zero CO2 emissions.
Company vehicles for private use
A different taxation regime must be applied if the employee is provided with a vehicle solely for private use. In such a situation, the employee's income will be the price determined in accordance with the Property Valuation Act: i.e., the usual price at which the employee would have rented the car, or the price that the employer would have charged other persons for providing the car.
Vehicles acquired by the employer under finance lease arrangements
A common situation is that the employer acquires the vehicles they provide to employees under a finance lease. For the purposes of determining the additional income tax, it is necessary to take as a basis the entry price of the vehicle at the original owner – the leasing company, even if the vehicle is subsequently purchased.
Fuel for private travel
Fuel consumed for employees' private travel must also be considered for taxation purposes. If all fuel, i.e., also fuel used during private travel, is paid for by the employer, it also constitutes the employee’s taxable income, pro rata to their business and private travel, based on the vehicle’s fuel consumption and the respective fuel price (again, including VAT).