Electric Cars in Business 2026: Depreciation, the 2M Limit, VAT

Electric cars are no longer a rarity in Czech business. Tax rules actually favour them more than a classic combustion-engine car: a zero-emission vehicle acquired between 2024 and 2028 can be tax-depreciated in just two years instead of the standard five. On the other hand, two caps apply to all passenger cars regardless of powertrain: the 2,000,000 CZK acquisition price limit for tax depreciation and the 420,000 CZK VAT deduction cap.

In this article we'll go through how extraordinary depreciation of zero-emission vehicles works, how depreciation is calculated for a car costing more than 2,000,000 CZK, what the VAT limit means in practice, and how private use is handled. We draw on Act No. 586/1992 Coll., on Income Taxes (the Income Tax Act), the VAT Act as amended by the consolidation package No. 349/2023 Coll., and Financial Administration interpretations referenced throughout the text.

What counts as a zero-emission vehicle under the law

The definition is set out in Section 21b(7) of the Income Tax Act. According to the Financial Administration's guidance, a zero-emission vehicle is a road motor vehicle that uses exclusively electricity or hydrogen as fuel, or any other vehicle whose operation produces no CO2 emissions. This typically means a pure electric car or a hydrogen car.

In addition, the law recognises low-emission vehicles (Section 21b(6) of the Income Tax Act): category M1, M2, or N1 vehicles with CO2 emissions up to 50 g/km that are not zero-emission. Most plug-in hybrids fall into this category. The distinction matters: the 24-month extraordinary depreciation applies only to zero-emission vehicles, while plug-in hybrids are depreciated over the standard 5 years.

Extraordinary depreciation: an electric car written off in 24 months

Under Section 30a of the Income Tax Act, a taxpayer who is the first depreciator of a zero-emission vehicle acquired between 1 January 2024 and 31 December 2028 may depreciate 100% of the acquisition price without interruption over 24 months:

Compare this to a classic car, which falls into the 2nd depreciation group with a 5-year depreciation period. With an electric car, you get the same tax saving in expenses roughly twice as fast, which is especially useful in years when you have a high tax base.

Example: A self-employed person (OSVC) buys an electric car in August 2026 for 1,200,000 CZK and puts it into business assets. From September 2026, they claim 60,000 CZK monthly (60% of 1.2 million divided by 12), and from September 2027, 40,000 CZK monthly. In 2026 they depreciate 240,000 CZK, in 2027 a total of 640,000 CZK, and the remainder in 2028.

The 2,000,000 CZK acquisition price limit for M1 vehicles

Since 2024, under Section 30e of the Income Tax Act, a limit applies to the tax depreciation of category M1 passenger cars: depreciation can be claimed as a tax expense only up to an acquisition price of 2,000,000 CZK. The limit is confirmed by the General Financial Directorate's guidance on the tax aspects of acquiring vehicles and summaries in professional sources, for example on the POHODA Portal.

How it works: for a car costing more than 2,000,000 CZK, depreciation is claimed only proportionally, based on the ratio of 2,000,000 CZK to the actual acquisition price.

Example: An electric car costing 2,500,000 CZK. The ratio is 2,000,000 / 2,500,000 = 0.8. So only 80% of each calculated depreciation amount can be claimed as a tax expense. Combined with extraordinary depreciation, over 24 months you can tax-depreciate a maximum of 2,000,000 CZK; the remaining 500,000 CZK never becomes a tax expense.

The limit does not apply to ambulances and hearses, nor to vehicles operated under a licence for road motor transport (typically taxi services with an appropriate licence). It also does not apply to category N1 vans.

VAT: deduction capped at 420,000 CZK

The second cap was introduced into the VAT Act by the consolidation package. For a so-called selected passenger car (category M1) that is long-term business property of a VAT payer, input tax is considered to be at most 420,000 CZK. This corresponds to the VAT on a price of 2,000,000 CZK excluding tax. The General Financial Directorate published a detailed interpretation with examples in the Information on Applying VAT to a Selected Passenger Car from 1 January 2024.

Important details:

• The 420,000 CZK cap applies cumulatively to the acquisition of the car and all subsequent technical improvements to it.
• It applies to VAT payers regardless of powertrain; electric cars are not given preferential treatment.
• If you also use the car privately, the deduction is further reduced by the proportion of business use, just as with other assets.

Example: A VAT payer buys an electric car for 3,000,000 CZK plus 630,000 CZK VAT. They can claim a deduction of at most 420,000 CZK; the remaining 210,000 CZK of VAT is added to the acquisition price of the car. That price then still hits the 2,000,000 CZK limit for tax depreciation under Section 30e of the Income Tax Act.

Private use: self-employed vs. employee

Self-employed persons (OSVC) handle private use by reducing expenses. If you use an electric car in your business assets privately as well, you reduce both depreciation and operating expenses in proportion to business and private kilometres according to a logbook. Alternatively, you can use the reduced flat-rate transport allowance of 4,000 CZK monthly for the vehicle, which we cover in detail in our article on the flat-rate transport allowance.

Employees with a company car available for private use as well are taxed on a non-monetary benefit under Section 6(6) of the Income Tax Act. And here electric cars are significantly favoured. According to the Financial Administration's interpretation, the monthly non-monetary benefit amounts to:

The minimum taxable amount, however, is always 1,000 CZK monthly. For an electric car costing 1,200,000 CZK, an employee is taxed on only 3,000 CZK monthly, while for a comparable petrol vehicle it would be 12,000 CZK. For an s.r.o. with a managing director on an employment contract, this is one of the strongest arguments for a company electric car.

When an electric car pays off from a tax perspective

Conclusion

The tax regime for electric cars in 2026 is the most advantageous it has ever been for company cars in the Czech Republic: depreciation over 24 months and a quarter of the standard benefit taxation for employees. The window for extraordinary depreciation is time-limited, however, to vehicles acquired by 31 December 2028, and for more expensive cars you need to factor in the 2,000,000 CZK depreciation limit and the 420,000 CZK VAT deduction cap. Before buying, calculate the specific numbers for your situation, the difference between options can amount to hundreds of thousands of crowns.