Fuel VAT can only be deducted when the fuel is purchased for trucks, commercial vehicles or machinery used for taxable business activities. VAT on fuel purchased for passenger vehicles is generally not deductible.

The right to deduct VAT on fuel is one of the most frequently asked questions among entrepreneurs and companies registered for VAT purposes.

Although the rules may seem straightforward at first, the legislation makes a clear distinction between vehicles used exclusively for business purposes and those for which business and private use cannot be reliably separated.

According to the opinion of the Ministry of Finance, a VAT-registered taxpayer is entitled to deduct input VAT on fuel purchased for trucks, commercial vehicles, locomotives, ships, tractors and other work machinery, such as excavators, forklifts, pumps and port equipment. The condition is that the fuel is used exclusively for carrying out taxable business activities and that the taxpayer holds a valid invoice or import document, together with proof that the VAT has been paid.

On the other hand, the VAT Law expressly prohibits the deduction of VAT on fuel used for passenger vehicles, motorcycles, yachts, boats and aircraft, as well as on spare parts, consumables and services related to these vehicles.

The reason is simple: in the case of passenger vehicles, it is not possible to reliably distinguish between private and business use. Therefore, VAT deduction is prohibited even when the vehicle is used for business purposes.

However, certain exceptions apply. VAT on fuel for passenger vehicles may be deducted if the taxpayer is engaged in the sale or rental of vehicles, the transportation of passengers or goods, or driver training provided by a driving school.

In these cases, vehicles are used exclusively as a means of carrying out the taxpayer’s business activities, which justifies the right to deduct VAT.

To qualify for VAT deduction, the taxpayer must be registered for VAT purposes, purchase fuel for taxable business activities and hold a valid invoice containing all legally required information.

If the vehicle or equipment ceases to be used for taxable business activities, the taxpayer is required to make an adjustment to the VAT deduction within a period of five or ten years, depending on the type of asset.

In practice, the answer to whether VAT on fuel can be deducted primarily depends on the type of vehicle for which the fuel was purchased.

If the fuel is purchased for a commercial vehicle or work machinery, VAT deduction is permitted. If it is purchased for a passenger vehicle, VAT deduction is generally not allowed, except in specific cases where the use of such vehicles forms part of the company’s core business activity.