Company car: real costs or flat rate transport?

What is commercial property?

Business assets include assets that the entrepreneur (self-employed person or company) keeps tax records or accounts for. If you claim flat rate expenses as a self-employed person, you don’t technically have any business property – and therefore can’t include a vehicle. In the case of a corporation (e.g. an LLC), business property is all the property owned by the company.

A vehicle can be included in the business assets, but it can also be removed from them – both have tax and record keeping implications.

A car is a business asset

There are several advantages to including a car in business assets, which can mean significant tax savings in the long run. The most significant is the ability to write off the purchase price of the car.

The car is classified as tangible property in the second depreciation group and can be depreciated over five years under the Income Tax Act. Depreciation is fully tax deductible, which means that it gradually reduces the tax base of the entrepreneur and spreads the cost of the car over several years.

Another significant advantage is the possibility of claiming the real costs of operating the vehicle. This means that you can include in your tax deductible expenses not only fuel, but also the cost of repairs, regular and emergency servicing, compulsory liability, accident insurance, purchase of accessories, seasonal tyre replacement, technical evaluation of the car, washing or parking.

Disadvantages

As well as the tax advantages, the inclusion of a car in business assets brings with it several important obligations and potential disadvantages. One of these is the fact that if the car is sold, the proceeds from the sale become part of the tax base.

This means that if you decide to sell the car after a few years, the amount you receive for it is included in your income and subject to income tax. While you may be exempt from tax on a non-business car one year after you buy it, this benefit doesn’t apply here – even after five years of depreciation.

Another significant disadvantage is the obligation to keep a detailed logbook. The logbook serves as evidence in any tax audit and must contain precise details of each business trip – date, time, destination, purpose, route, mileage and odometer reading.

Without a properly maintained logbook, the tax authorities may question your costs associated with operating the vehicle and charge you tax. In practice, this means daily discipline and consistent recording of all data, or the use of electronic journey tracking systems.

The car is not a business asset

If you choose not to classify your car as business property, it will remain ‘private’, but you can still use it for business purposes. This method is used by many self-employed people who want to reduce the administrative burden or who are counting on the future sale of the car.

Advantages of this option

There are several practical advantages to this option. If you sell the car more than one year after it has been purchased, the profit from the sale is not subject to income tax, which can be financially very advantageous.

There’s also a significant benefit in terms of simpler administration – you don’t have to deal with accounting depreciation or complicated records of running costs.

Even though the vehicle is not registered as a company vehicle, you can still claim a basic mileage allowance and reimbursement for fuel consumed, just like employees on business trips. The exception is if you leased the car and have claimed the lease payments as a tax-deductible expense in the past – in this case, you cannot use the basic reimbursement and are only entitled to reimbursement for fuel.

Calculation of expenses

Expenses are calculated using the basic reimbursement rate, which for 2025 is CZK 5.80 per km. Fuel reimbursement can be added to this. Consumption is calculated by arithmetic average of the data in the technical certificate and the price per litre is based on the decree of the Ministry of Labour and Social Affairs.

For example, in 2025 the following prices can be applied:

• Petrol 95: 35,80 CZK/l
• Petrol 98: 40,50 CZK/l
• Diesel: 34.70 CZK/l
• Electricity: CZK 7.70/kWh

In case the real fuel prices are higher and you want to take this higher price into account, you have to prove it with receipts.

Disadvantages

If the car is not part of your business assets, you cannot claim the actual costs of running it. This means that you cannot include in your tax deductible expenses the cost of repairs and servicing, compulsory third party or breakdown insurance, the cost of washing, cleaning and other operational services, changing tyres or other accessories, as well as, for example, motorway vignettes or parking. All these costs must be paid out of your own pocket as they cannot be claimed on your tax records.

Although it is possible to use the basic reimbursement of CZK 5.80 per kilometre of driving (in 2025) together with reimbursement for fuel consumed, in many cases this system may not cover the actual costs of running the vehicle. This is particularly the case for drivers who drive frequently in the city and have higher fuel consumption, for owners of older cars with frequent repairs or where there are additional costs associated with operation, such as insurance, assistance services or loan repayments.

It is also the case that you cannot depreciate the purchase price of such a car, as depreciation is only for tangible assets that are recorded in the accounting or tax records. Thus, the value of the car cannot be deducted from your tax base over time, which deprives you of the opportunity to reduce your tax liability over the long term.

Finally, even a car that is not a business asset is subject to road tax if used for business purposes (but only if it is over 12 tonnes).

Transport expenses – flat rate

The flat-rate transport expense allows for the application of CZK 5,000 per road motor vehicle for each full calendar month in which the taxpayer used the vehicle to earn, secure or maintain taxable income and did not at the same time leave it for use by another person for even part of that month. In the month of acquisition or disposal of the vehicle , a pro rata part of the flat-rate may be applied.

The flat-rate does not cover all the costs associated with the car. Actual expenditure on fuel and parking costs incurred while travelling for work cannot be claimed. At the same time, neither the reimbursement of fuel expenses nor the basic reimbursement rate can be claimed in addition to the flat-rate. Other costs such as insurance, servicing, repairs, rent, motorway tolls or depreciation are not automatically included in the CZK 5,000. They are assessed separately according to the general rules of tax deductibility and whether the vehicle is in business ownership, leased or non-business ownership.

The flat rate can be applied to road vehicles in categories L, M and N, typically motorcycles, cars, buses, vans and trucks. It does not apply to agricultural and forestry tractors or working machinery. The amount of the flat rate is uniform regardless of the engine capacity, the age of the vehicle or its actual consumption. The Revenue defines vehicles for this flat-rate scheme by the categories L, M and N.

The flat-rate expenditure can be applied to a maximum of three road motor vehicles per tax year. These may be own vehicles, whether or not they are classified as commercial property, or leased vehicles. In contrast, the flat rate does not apply to vehicles normally hired and during a finance lease, as the law limits it to own or hired vehicles.

An important condition is that the vehicle must not be given to another person to use, for example, a family member or friend for private driving. However, a business trip made by a co-worker or employee is not considered to be a transfer to another person unless the employee also uses the vehicle for private purposes.

When deciding whether a lump sum is worthwhile, do not compare CZK 5 000 with the total monthly cost of the car. It is correct to compare it primarily with the expenses that the lump sum replaces – i.e. fuel, parking on business trips and, if applicable, reimbursements according to the specific vehicle scheme.

If the taxpayer uses the vehicle only partly to earn, secure or maintain taxable income, for example for private purposes, he can only apply a reduced flat-rate expense of 80 %, i.e. CZK 4 000 per month. For a vehicle with a reduced flat-rate, other related expenses are also reduced: 20% of these expenses are not tax deductible, except for depreciation, for which the law provides a separate 80% depreciation rule. In practice, the reduced flat-rate can only be used for one vehicle; for the other vehicles to which the flat-rate applies, the law operates an exclusive use regime for the production, provision and maintenance of taxable income.

What else can be claimed in addition to the flat rate?

Expenses that can be claimed alongside the flat-rate transport expenses include the cost of repairs and routine maintenance of the vehicle, as well as insurance premiums – both compulsory liability and accident insurance. Tax depreciation of the vehicle, the cost of long-term parking or garage parking, rent for the use of the vehicle, motorway tolls and road tax can also be claimed. However, they must be demonstrably incurred to earn, secure and maintain business income.

If you use a reduced flat rate (CZK 4,000), other tax deductible costs must be reduced to 80% of their value, including depreciation, parking, insurance and servicing. The only exception to this is depreciation of the vehicle, which can be taken into account separately.

Expenditure on fuel cannot be claimed at the same time as the flat-rate expenditure, either according to actual consumption or according to the Decree price. Similarly, it is not possible to combine the flat-rate with the application of basic compensation for wear and tear (e.g. CZK 5.80/km). It is also prohibited to include short-term parking fees – for example, during a business trip – which would otherwise be an allowable expense under the real cost regime.

If you use a reduced flat rate, you cannot claim 20% of other expenses related to the operation of the car (e.g. servicing or insurance premiums, except for the depreciation already mentioned, which is deducted separately).

The flat-rate transport expense option is not entirely flexible. Once you have chosen this method, you must apply it throughout the calendar year, for a specific car. It is therefore not possible to switch from flat rate to actual expenditure or vice versa in the middle of the year. The flat rate is also reduced proportionately if you acquire or dispose of a vehicle during the year – you then only claim a pro-rata amount for the specific months you owned and used the car for business.

What’s the most rewarding?

The right scheme can bring you significant tax savings, but it can also save you time and hassle with administration. Let’s take a look at which approach pays off the most in which situation:

A car in a business property pays off when:

• you drive a lot (on the order of hundreds to thousands of miles per month),
• you have high running costs (frequent refuelling, servicing, insurance, parking),
• you are a VAT payer and you want to claim a deduction for the purchase price and operation,
• you don’t mind administration, including keeping a logbook and collecting documents,
• you don’t mind taxing the income from the sale of the car in the future.

A non-business car is worthwhile when:

• you use the car only occasionally for business, but mostly for personal use,
• you don’t want to deal with depreciation and classifying the car as an asset,
• you want to claim a lump sum for wear and tear (CZK/km) and reimbursement for petrol,
• you don’t need a VAT deduction,
• you plan to sell the car eventually and want to avoid taxation of the profit from the sale.

The flat-rate transport expense is worthwhile if:

• you don’t want to keep a logbook or collect receipts,
• you drive little or cheaply – operating costs up to about CZK 5,000 per month,
• you appreciate simplicity and predictability – a fixed amount each month,
• you are not subject to VAT or do not deal with its application,
• you have a car without a lease and in personal or company ownership.

Examples from life

Intensive use of the car: Incorporation into business assets

Peter is a building craftsman and drives daily to jobs all over the country. He drives over 3,000 miles a month, frequently pays for parking, repairs the car, changes tires, and fills up the tank several times a week. He bought the car for CZK 800 000 in cash and is a VAT payer.

Peter can write off the entire purchase price of the car over 5 years, deduct VAT on the purchase of the car and on all running costs, while claiming all real expenses – which is definitely worthwhile given his driving volume. He may have to keep a log book, but it will give him significant tax relief.

Occasional business trips: car outside business property

Jana is a freelance graphic designer. She does most of her work from home. She mainly uses her car privately, but once a week she drives to a meeting at a coworking space or a printer. She drives about 400 km per month for business.

Jana does not have to deal with the classification of the car as an asset or tax depreciation. She uses the mileage allowance (CZK 5.80/km) and adds fuel costs based on average consumption. She can thus claim tens of thousands of crowns a year as an expense without having to keep accounts or complicated records. And if she ever sells the car, she won’t have to pay income tax after a year of ownership.

Small operation, low cost: flat-rate transport expenses

Tomas is an IT specialist who runs his business while working. He uses the car only occasionally – once a month he drives to a client meeting, occasionally he drives to a training session. His monthly expenses do not exceed CZK 2,000. At the same time, he sometimes drives his children to clubs in the car.

Tomáš can claim CZK 4 000 per month as a reduced flat rate without keeping a logbook – even if he only drives half of this amount per month. He avoids receipts, petrol tickets and consumption calculations. In addition, he can be sure that private use does not matter for one car.

Summary

When using a car in business, the entrepreneur can choose between three modes – to include it in business assets, to leave it outside, or to use a flat rate transport expense.

Inclusion in business assets allows depreciation and real expenses (fuel, servicing, insurance) to be claimed, which pays off with frequent use and high costs. The disadvantages are the need to keep a logbook and the taxation of any sale of the car.

A non-business car offers less paperwork and the advantage of tax exemption when sold after a year. Lump-sum mileage and fuel allowances apply, but actual operating expenses and purchase price cannot be deducted.

A flat rate transport expense (CZK 5,000 per month, or CZK 4,000 for private use) is the simplest option without the need to keep records. However, it cannot be combined with mileage and fuel allowances and can be used for a maximum of three vehicles used for business.