Circular Letter No. 25088/2025 (Portugal Tax Authority)
Topic: VAT deduction rules for passenger vehicles under Article 21(2)(f) and (g) of the VAT Code.
General Rule
- VAT on expenses related to taxable operations is deductible if legal conditions are met.
- Normally, VAT on passenger cars (purchase, rental, maintenance) is not deductible.
Definition of Passenger Car
- Vehicles with up to 9 seats (including driver), not exclusively for goods/agriculture/industry.
Exceptions (Eco-Friendly Vehicles)
- Electric cars: Full VAT deduction if purchase price (excluding VAT) ≤ €62,500.
- Plug-in hybrids: Full VAT deduction if price ≤ €50,000.
- GPL/GNV (gas-powered): 50% VAT deduction if price ≤ €37,500.
Included in Purchase Price
- Accessories, mandatory insurance, registration fees—even if invoiced separately.
Private Use
- Private use of a vehicle with VAT deduction counts as a taxable service; VAT must be charged on the proportion of private kilometers.
Operational Leasing (Renting)
- Deduction applies only to the pure rental component if clearly itemized on the invoice.
- If invoiced as a lump sum, no VAT deduction allowed.
Source gov.pt
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