Taxation of low-emission vehicles provided to employees for business and private purposes

In Section 6 (6), the Income Tax Act newly states that 1% of the entry price of a vehicle is considered to be the employee’s income when the employer provides the vehicle free of charge for business and private purposes, or 0.5% of the entry price of the vehicle if it is a low-emission motor vehicle pursuant to the act regulating the support of low-emission vehicles through public procurement and public passenger transport services. Furthermore, pursuant to this provision, the income of the employee to whom the employer has provided multiple consecutive vehicles for free use for both business and private purposes during one calendar month is in the amount of 1% of the maximum entry price of the motor vehicle, though if the vehicle with this highest entry price is a low-emission vehicle, the employee's income is only 0.5% of this highest entry price. If the employer provides the employee more than one vehicle at the same time during one calendar month free of charge for business and private purposes, the employee's income is 1% of the sum of the entry prices of those vehicles not considered to be low-emission and 0.5% of the sum of the entry prices of those vehicles that, on the contrary, are considered to be low-emission.

Although the amendment to the Act is only effective from 1 July 2022, according to the transitional provisions, the amendment will extend to the income of employees throughout the 2022 tax period. However, for the calculation of advanced payments of income tax from employment for the calendar months ending before the amendment comes into force, the text of the Act applicable until 30 June 2022 shall apply.

Interpretation of the Ministry of Finance 

Given that the law regulating the support of low-emission vehicles through public procurement and public passenger transport services has not yet come into effect, the Ministry of Finance has issued information on how to interpret the amended provisions in question.

According to this information, ‘a low-emission vehicle for the purposes of the income Tax Act’ means a road vehicle of category M1, M2 or N1, which does not exceed the CO₂ emission limit of 50 g/km and 80% of the emission limits for real-time air pollutants in accordance with Annex I to Regulation (EC) No. 715/2007 of the European Parliament and of the Council of 20 June 2007 on type approval of motor vehicles with respect to emissions from light passenger and commercial vehicles (Euro 5 and Euro 6), as amended.’

Furthermore, the Ministry of Finance specifies that employers should calculate the advanced payments on income tax for the period of January to June 2022 with an income of 1% of the entry price for low-emission vehicles, while the reduction to 0.5% can only be used for the calculation of advanced payments for July 2022 and on. A possible reduction in the employee's taxable income for the use of a low-emission vehicle in the first half of 2022 will only occur in the context of an annual reconciliation carried out by the employer or when an employee's taxable income confirmation is issued.

If you have any questions about the aforementioned information, please do not hesitate to contact our experts who are ready to assess your situation.

Authors:

Anna Klímová, Editor Mazars Tax View

Gabriela Ivanco, Tax Manager